DeFi Technologies Inc. (DEFT:NASDAQ; DEFI:CBOE; R9B:FSE) increased its 2025 revenue guidance recently, and the fintech company is trading at a discount to its peers, reported Analyst Ed Engel, Compass Point Research & Trading, in a May 14 research note.
"We see additional upside to 2025 guidance, which could drive additional upside to the stock," Engel wrote.
Revenue Guidance Increased
Engel reported that DeFi raised revenue guidance for the year by 17% to CA$286 million (CA$286M) from stated guidance on March 31 of CA$227M.
The reasons for the latest increase are higher crypto prices that directly boost ETP (exchange-traded product) revenue, accelerating ETP inflows and DeFi Alpha deals. Between January 1 and April 30, each month had a positive inflow, and the period's total net inflow was CA$83M. Unlike previous guidance, the revised guidance takes into account DeFi Alpha's CA$30M trade profit announced on May 5 plus, potentially, any prospective near-term deals.
Undervalued, 71% Uplift
Engel made a case for why DeFi warrants a higher valuation by painting the company's financial picture. During Q1/25, DeFi earned a 6.2% revenue yield on monthly average AUM (assets under management). Since quarter's end, DEFT has been up 75% month after month.
The company generates more than CA$200M of normalized revenue. With higher AUM, the company's fees increase quarter over quarter. Cash expenses are only CA$20–30M. EBITDA margins exceed 75%. DeFi has run rate EBITDA of CA$160M, CA$142M on the balance sheet and negligible debt.
Revenue is expected to grow with rising crypto prices and DeFi expanding into new markets. Further, DeFi's revenue is less volatile than that of crypto exchanges that rely on retail trading activity, such as Coinbase Global Inc. (COIN:NASDAQ).
Despite all of the above, DeFi trades at 12x earnings per share versus its crypto peers at 20x–25x. Also, DeFi trades at 10x normalized EBITDA versus its peers at 25x–30x.
The company's share price at the time of Engel's research report was US$3.80 per share. In comparison, Compass Point's target price on the fintech firm is US$6.50, implying a 71% return.
DeFi remains a Buy.
Upside Via Expansion
DeFi is expanding into new geographic markets globally with ETP listings, but 2025 guidance does not reflect this, Engel pointed out. The company is targeting regions such as the United Arab Emirates (UAE), Singapore, the United Kingdom and Canada and is working to obtain regulatory approval in each one. Success in this regard equals additional upside. Because DeFi can capitalize on existing products, costs tied to international expansion are low.
Regarding the UAE, DeFi is partnering with local brokers there for distribution, which should accelerate growth of AUM.
"We view UAE as a meaningful catalyst that could drive 2025 earnings above expectations
Reporting Volatility to Lessen
Engel noted that the gains and losses DeFi reports, according to Canadian generally accepted accounting principles (GAAP) requirements, are more volatile than underlying cash flow. The company holds digital assets in its ETPs and stakes the assets to generate yield. It reports ETP AUM on its balance sheet and thus must report market-to-market profits and losses on customer assets. It does so on a monthly basis.
With respect to DeFi Alpha's trading profits, from buying locked or staked tokens at discounts to spot, DeFi reports them as they occur and must use DLOM, or discount for lack of marketability, accounting in doing so. When DeFi Alpha closes deals and existing unlocks expire, DeFi must report GAAP revenue and losses as DLOM changes quarter over quarter.
"Over time, we expect the impact of DLOM accounting to smooth as token unlocks offset new DeFi Alpha trades," Engel wrote.
More Stock Specifics
Engel reported that at the time of his report DeFi had 325.6 million shares outstanding, a market cap of $1.2 billion and a 52-week range of $0.59–4.95 per share.
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Disclosures for Compass Point Research & Trading and DeFi Technologies Inc, May 14, 2025:
Analyst Certification: I, Ed Engel, hereby certify that the views expressed in this research report accurately reflect my personal views about the subject securities or issues. I further certify that I have not received direct or indirect compensation in exchange for expressing specific recommendations or views in this report.
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