NerdWallet (NRDS) is coming public on November 4, 2021 and we’re as excited as Ogre:
About the NerdWallet IPO
It’s been a great year for IPOs with names like Affirm (AFRM), Coinbase (COIN), Monday.com (M+(MNDY), Digital Ocean (DOCN), and Toast (TOST) making big splashes.
NerdWallet, which will trade under the ticker $NRDS, could be the next big hitter.
NerdWallet is expecting to price its shares at $17-$19 for a market cap of about $5 billion.
We would not be surprised to see the stock at $30+ on day one.
What Does NerdWallet Do?
NerdWallet is a leading personal finance platform, giving advice on everything from credit cards to investing to banking to personal loans to banking.
And NerdWallet makes money by providing leads to financial services companies.
For example, if you were looking for a credit card, you might visit NerdWallet and compare cards from the likes of Wells Fargo and Chase, like you see here:
So if you applied for the Chase card, Chase would pay NerdWallet for sending the referral.
This is a great businesses because financial services companies pay BIG money for leads.
And that’s given NerdWallet a nice revenue base.
In the 9 months ended September 30, 2021, NerdWallet earned $280.1 million in revenue, up 49% year-over-year.
NerdWallet has lost money in 2021.
Why? Because the company spent $207.8 million on marketing – a whopping 74% of revenues.
That’s resulted in an operating loss of -$29.6 million.
And if they hadn’t spend anything on marketing, it would have been positive $178.2 million.
Is that bad?
NO. It’s good.
It means the underlying business is ridiculously profitable.
NerdWallet’s gross margins are in the 90% range, which is insanely high.
Of course, they HAVE to spend money on marketing.
But NerdWallet has the flexibility to pour money into marketing to grow OR dial it back and ramp up profitability.
What Could Go Wrong With NerdWallet
NerdWallet is heavily dependent upon Google for traffic.
So if it was to ever fall in the rankings on Google, its business would be hurt tremendously.
And it’s not clear how fast the company can grow without spending so much money on marketing.
It’s also going to be an expensive stock with a possible market cap over $6 billion after it opens.
Our Final Take on the NerdWallet IPO
Personal finance is a very competitive space and NerdWallet’s growth should attract hot money in the near-term. So we think the stock could go up VERY quickly.
And eventually, we think a larger company like Zillow (Z), Intuit (INTU) or IAC (IAC) could acquire NerdWallet for exposure to personal finance.
So… we like it! And make sure you sign up for our email list below so you can get our future takes on $NRDS!