We came across a bullish thesis on CoreCard Corp (CCRD) on ValueInvestorsClub by huqiu. In this article we will summarize the bulls’ thesis on CCRD. CoreCard shares were trading at $14.00 when this thesis was published, vs. closing price of $14.52 on Aug 29.
A client signing off on a loan agreement for secured lending.
CoreCard (CCRD) is a specialized provider of mission-critical software for consumer lending, offering modern and cost-efficient solutions that stand out in the highly competitive fintech industry. CoreCard’s software is particularly designed for credit card issuance and management, making it an essential tool for financial institutions involved in consumer lending. The company’s software is known for its ability to handle complex transactions with high efficiency, which has led to its adoption by major players in the financial sector. A significant portion of CoreCard’s revenue comes from its partnership with Goldman Sachs (GS), particularly in processing for the Apple and GM credit cards, which are among the company’s top clients.
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However, CoreCard has faced uncertainty due to Goldman Sachs’ recent decision to explore strategic alternatives for its consumer lending platforms, including the Apple and GM credit card programs. This has raised concerns about whether CoreCard will retain its role as the card issuing platform if a new issuer takes over these programs. Despite these concerns, there are strong reasons to believe that CoreCard is well-positioned for growth and that its stock could see significant upside in the next 12-24 months.
The Apple Card, despite the challenges faced by Goldman Sachs, has been a remarkable success, attracting millions of users and generating substantial credit card receivables. The issues faced by Goldman Sachs, which led to its reconsideration of its consumer credit ambitions, were largely due to the program’s design rather than any flaws in CoreCard’s software. CoreCard’s platform has proven its reliability and efficiency, and it remains an integral part of the Apple Card’s success. Any potential new issuer for the Apple or GM cards would likely be cautious in replacing such a critical component, especially given the risks and challenges associated with transitioning to a new software platform.
Looking ahead, CoreCard’s future will likely involve diversifying its client base beyond Goldman Sachs, which could lead to significant growth. The company has already demonstrated its capability by successfully transitioning the GM card to its platform without issues. As CoreCard continues to attract new clients and possibly expands its service offerings, the potential for revenue growth and improved profitability is substantial.
Moreover, CoreCard has maintained strong EBIT margins in the past, even during periods of lower growth. With a current cost structure that can support additional large clients, CoreCard is positioned to capitalize on new opportunities. If the company can maintain or grow its relationships with existing clients like GM and Apple while also onboarding new clients, its stock could experience a significant re-rating, potentially doubling in value within the next couple of years. As the fate of the GM and Apple cards is clarified, and CoreCard continues to diversify its revenue streams, investors could see substantial returns from this underappreciated fintech company.
CCRD is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 8 hedge fund portfolios held CCRD at the end of the first quarter which was 10 in the previous quarter. While we acknowledge the potential of CCRD as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as CCRD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
