Voyager Digital: Astonishing Growth, Missing Profits

Voyager Digital (Canada) (VYGVF) engages in the development and commercialization of a digital platform, and focuses on enabling users to buy and sell digital assets such as cryptocurrencies.

The company was founded on June 25, 1993, and is headquartered in Vancouver, Canada.

I am bearish on VYGVF stock. Shares of the crypto asset brokerage firm have one-year gains of approximately 58% but losses of about 14% in 2022.

The stock rose too fast, the company is unprofitable, and in the last quarter, it reported a negative EPS surprise.

Voyager Digital Business News

Voyager Digital has been very active in providing an ongoing stream of news for investors to analyze and decide whether to invest or not in this technology company.

The cryptocurrency platform announced in December that it has become the official cryptocurrency brokerage partner of the National Women’s Soccer League (NWSL) providing value in the form of helping “the league grow and provide its players with crypto education and direct financial support, paid in crypto,” said Steve Ehrlich, CEO and co-founder of Voyager.

The firm also became the official cryptocurrency brokerage parent of the Dallas Mavericks.

The Voyager token (VGX) was listed on Coinbase Pro but “VGX is not yet available on Coinbase.com or via Coinbase’s Consumer mobile apps.”

In other news, the firm is partnering with CoinLedger to facilitate crypto tax reporting, and there was the announcement of the Voyager Debit Mastercard, the“first crypto-based debit card that pays up to 9% annual rewards to Voyager customers, as well as additional rewards for Voyager Loyalty Program members.”

In October, Voyager Digital received an investment of $75 million from Alameda Research, considered to be among the largest crypto market makers globally.

Fiscal Year 2021

Voyager Digital has its fiscal year ending in June, with several remarkable figures achieved in FY 2021.

Total revenue increased to $175 million, versus only $1 million in FY 2020. Operating income of $56 million was reported versus an operating loss of $11 million in FY 2020.

Total verified users grew to 1.75 million on June 30, 2021, compared to 86,000 verified users same period one year ago. Total funded accounts grew to 665,000 from 23,000 on June 30, 2020. Finally, total assets under management grew to $2.6 billion from $35 million on June 30, 2020.

Fundamentals – Risks

Despite the strong growth numbers the company is losing money. Checking the ROE key metric for FY 2021 of -55.10% and -65.15% on a TTM basis, it is easy to spot the weak spot for the company, profitability. VYGVF stock earnings do not inspire confidence yet.

Bitcoin is highly volatile and any prediction about how it will perform in 2022 is mostly speculative. Crypto Stocks like VYGVF are expected to be highly volatile in 2022, which should make their high price swings unsuitable for investors who do not seek out high-risk plays.

The Altman Z-score of 0.24 is indicative of a company in a distress zone. This implies bankruptcy possibility in the next two years.

Lastly, shareholders have been diluted in the past year, with total shares outstanding growing by 42.1%.

Wall Street’s Take

Voyager Digital has a Strong Buy consensus based on five Buys. The average Voyager Digital price target of $22.47 represents 116.3% upside potential.

Voyager Digital has delivered remarkable growth in revenue, users, and funded accounts. It has not been able to turn this growth into net profits. There has been a very strong dilution too that has hurt shareholders.

Embrace for a rocky 2022.

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