Bear of the Day: MoneyLion (ML)

MoneyLion (ML) is a Zacks Rank #5 (Strong Sell) that is a fintech company offering a variety of financial products and services aimed at helping consumers manage their finances.MoneyLion aims to serve middle-class Americans, especially by offering low-cost financial products and services designed to help users improve their credit scores and invest in their future.While the company stands out in the Fintech world, the stock might have gotten ahead of itself. Investors should look to sell into the recent rally after earnings miss that is taking analyst estimates lower.About the CompanyMoneyLion was founded in 2013 and is based in New York, NY. The company employs 600 people that help provide tools for budgeting, saving, and credit building, as well as small loans, investment options, and financial advice.One of MoneyLion’s key features is the RoarMoney account, a digital banking solution that includes checking accounts, debit cards, and financial tools accessible through a mobile app. MoneyLion also has a premium subscription service, MoneyLion Plus, which includes access to investments, credit builder loans, and additional financial management tools.ML is valued at $1 billion and has a Forward PE of 88. The stock holds Zacks Style Scores of “A” in Growth, but the valuation is starting to become a concern and the “C” and high PE show that.Q3 EarningsThe company reported earnings in early November missing by 350%. However, its quarterly sales of $135.466 million surpassed expectations by 0.19%, marking a 22.86% year-over-year increase.The company also raised its sales guidance for FY24 to a range of $536 million to $541 million, up from a prior estimate of $525 million to $535 million. Q4 sales are projected between $149 million and $154 millionDespite strong sales growth, the company's inability to generate profitability should raise concerns, especially as it failed to meet expectations on earnings.For now, investors are more focused on the growth aspect, which was evident in the stock moving from the $45 area to $90 in just six trading sessions. For those that like math, that is a 100% move on a big earnings miss.Earnings EstimatesGiven the violent move higher in the stock after an earnings miss, odds are we have a short squeeze on our hands. Even so, it's very impressive in such a short time.But while the stock moves higher, analysts are lowering their estimates significantly when you look at the longer term.For the current quarter, estimates have moved 53% higher over the last 30 days. However, if you look over the last 90 days, estimates have fallen, going from $0.48 to $0.43, or 10%Looking at the current year, estimates have declined 25% in the last 90 days, down from $1.40 to $1.04.Next year’s outlook follows this downward trend, with estimates reduced by 39%, from $5.58 to $3.43.Investors seem to be excited about the short-term results and overlooking whether the revenue growth can sustain long-term profitability and shareholder value.Technical TakeHard to argue with a 100% up move in a week, but investors have little to worry about when it comes to the charts. Gravity might set in, but for now it’s a moonshot.If we were just looking at the chart, I would be targeting the 161.8% Fibonacci extension at $150. This can be found drawing from the June highs to September lows.However, gravity likely sets in here and the key will be if the 21-day moving average holds. For now, this is at $74, about 18% below the current trading price.After that the 200-day is at $34 and the $50 day is at $56.Investors should get cautious if those support levels start to break.In SummaryMoneyLion's recent 100% surge feels more like a mirage than momentum. A massive earnings miss highlights a struggle to balance growth with profitability.Analysts are slashing forecasts, with next year’s EPS estimates dropping 39%, and long-term growth assumptions looking increasingly fragile. The sky-high Forward P/E of 88 amplifies valuation concerns, while technical support levels risk unraveling the hype if tested.For those interested in the Fintech space, a better option might be Pentair (SOFI). The stock is a Zacks Rank #2 (Buy) that is coming off a 25% earnings beat and trading at 2024 highs.  Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 228 positions with double- and triple-digit gains in 2023 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report MoneyLion Inc. (ML): Free Stock Analysis Report SoFi Technologies, Inc. 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