Should You Buy Chime Stock While It's Below $43?

Core Viewpoint - Chime, a fintech company, has significant growth potential despite its stock trading below its initial public offering price, warranting a closer examination of its business model, growth rates, and valuations [1] Business Model - Chime operates as a mobile-first banking service provider, partnering with FDIC-insured banks to manage customer deposits, offering features like free checking and savings accounts, overdraft protection, and early pay access [3][4] - The company primarily targets lower-income users who may not have access to traditional banking services, providing tools that cater to those living paycheck to paycheck [4] - Chime generates revenue mainly through interchange fees from Visa debit and credit card transactions, retaining up to 1% of the fees charged to merchants [6] Growth Rates - In 2023, Chime's revenue increased by 27% to $1.28 billion, with a gross margin of 83% and a narrowed net loss from $406 million to $189 million [9] - The number of active members grew by 25% to 6.6 million, with an average revenue per active member (ARPAM) improving slightly from $210 to $212 [10] - For 2024, revenue rose by 31% to $1.67 billion, gross margin increased to 88%, and net loss further narrowed to $25 million, with active members reaching 8 million and ARPAM jumping 16% to $245 [11][12] Valuations - In Q1 2025, Chime's revenue grew by 32% year over year to $519 million, with an adjusted EBITDA margin of positive 5% and active members increasing to 8.6 million [13] - Analysts project Chime's revenue to rise by 26% to $2.1 billion for the full year, with a positive adjusted EBITDA of $53 million, and expect a CAGR of 19% for revenue and 175% for adjusted EBITDA from 2025 to 2027 [14] - With an enterprise value of $10.1 billion, Chime's valuation stands at 4 times next year's sales and 43 times its adjusted EBITDA, indicating it may be a long-term investment opportunity in the growing market for banking services aimed at unbanked and underbanked individuals [15]