We are initiating coverage on shares of OLB with a BUY rating and 12-month price target of $7. The OLB Group is an emerging player in the rapidly growing financial technology (FinTech) sector. We believe the recent selloff in shares of OLB, prompted by temporary retail store closures in the wake of the COVID-19 pandemic and the resulting business disruption to the company, represents an attractive entry point for the stock, especially given the recent expansion of the company’s suite of FinTech products and services. We believe shares of OLB should trade at an Enterprise Value/2021E Revenue multiple of 5x, which generates our price target of $7.
Offering an expanded suite of products and services in the burgeoning FinTech industry. In addition to its core eVance payment processing solutions business, the company has significantly expanded its portfolio of FinTech products in recent quarters to include a cloud-based business management platform for commerce services called OmniSoft, a unique online capital raising platform for small and mid-sized businesses called CrowdPay, and a proprietary payment gateway solution called SecurePay.
Significant cross-selling opportunities. The OLB Group’s core eVance business has successfully established relationships and does business with thousands of merchant customers and clients in the U.S., including traditional bricks-and-mortar retailers, eCommerce retailers, restaurants, service companies, and others. We believe these established relationships represent a significant opportunity for the company to market and cross-sell its new FinTech products, which should not only help drive incremental revenue and profitability, but should also help further entrench the company’s relationships with these merchants.
Expected rebound in transactions processed should drive near-term improvement. Management recently noted that, due to widespread temporary business closures during the earlier phases of the pandemic, the number of transactions processed by the company fell sharply in March and decelerated further in April. However, both May and June saw an encouraging sequential pickup, and we would expect such monthly sequential trends to have improved steadily through the third quarter, as businesses around the country have started to reopen and as the economy has begun to improve slowly but surely.
Risks. Potential investment risks to attainment of our price target include delays and business disruption as a result of the ongoing COVID-19 pandemic, regulatory risk in the highly scrutinized financial services sector, possible dilution from future capital raises, competitive risk, and potential technological obsolescence in a rapidly evolving industry.
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About The OLB Group, Inc.
The OLB Group, Inc. is a payment facilitator and commerce service provider that delivers cloud-based merchant services for web-based and brick-and-mortar organizations. OLB provides a seamless, end-to-end digital commerce solution that includes site creation, hosting, transaction processing and payment gateway, order fulfillment, customer service, outbound marketing, sales reporting, and fundraising. With services from private label shopping sites designed to maintain the unique look or feel of the merchant website, to order fulfillment and customer service, OLB remains invisible to the user and promotes the merchant’s brand with market-leading technology and solutions. For more information about solutions, services, or to find a reseller, please visit www.olb.com.
All statements from The OLB Group, Inc. in this news release that are not based on historical fact are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, but are not limited to, statements concerning our ability to implement our proprietary merchant boarding and CRM system and to roll out our Omni Commerce applications to our current merchants and the integration of our secure payment gateway with our crowd funding platform. While the Company’s management has based any forward-looking statements contained herein on its current expectations, the information on which such expectations were based may change. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of risks, uncertainties, and other factors, many of which are outside of our control, that could cause actual results to materially differ from such statements. Such risks, uncertainties, and other factors include, but are not limited to, uncertainty regarding our ability to integrate the companies that we have recently acquired and to repay outstanding indebtedness and fund our operations. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, our actual results may differ significantly from management’s expectations. These risks and uncertainties include those factors described in greater detail in the risk factors disclosed in our Form 10-K for the fiscal year ended December 31, 2018 filed with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those anticipated in these forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this news release, in the case of documents referred to herein, the date of those documents. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.