Marqeta is a ‘future fintech powerhouse,’ analyst says

He likes that Marqeta MQ, -3.59% has a roster of fast-growing customers, meaning that its own growth “is tethered to the success of equally disruptive customers: SQ, Instacart, StockX, Coinbase, Eventbrite, and AFRM to name a few.”

El-Assal likens the company to Braintree and Stripe, two big-name fintech businesses that became successful by meeting the needs of hot technology companies.

Marqeta uses application programming interfaces to let tech companies build debit and other card products that match the unique functions of their businesses. Instacart, for one, uses Marqeta technology in the cards it gives shoppers to pay for customer orders. The cards make it so that shoppers can only fulfill specific orders with them, helping to reduce fraud.

“When SQ, AFRM, or Instacart, for example, need to embed card products into their business models, they are not looking for a third-party processor to build out a custom solution for them,” El-Assal wrote. “As with the rest of their tech stack, fintechs are looking for a more modular, self-service approach where API-driven ‘Lego blocks’ can be utilized by developers themselves to power unique business processes and flows.”

While Square, now known as Block Inc. SQ, -5.26%, was by far Marqeta’s largest customer at the time of its June 2021 initial public offering, El-Assal likes the progress that the company is making to diversify its business, with recent success in areas like expense management and cryptocurrency programs. The expense-management vertical could grow more quickly than the company average, in his view, and the crypto vertical could deliver better growth than Marqeta currently models.

Overall, El-Assal sees a “compelling buying opportunity” in Marqeta shares, as the company has moved past lockup expirations and faces what he views as beatable consensus estimates. He lifted his price target to $19 from $17 on the stock.