🤖📈 The best trade ideas for August 18

International Dinero Express (IMXI) is a money remittance services provider focused on the Latin America and Caribbean corridor. The author believes IMXI represents an undervalued opportunity with a price target of $24.96. Their bullish thesis is based on IMXI's differentiation through strategic agent partnerships, optimization of its network, and excellent client service rather than competing solely on price like competitors. The Latin American remittance industry has steady growth potential driven by immigration patterns and adoption of new technologies. At current valuations of 8.9x P/E and 5.8x EV/EBITDA, IMXI offers substantial upside. Risks include intensifying price competition, cryptocurrency adoption, and uncertainty in US immigration trends. However, even conservative projections point to IMXI capable of doubling or tripling investor returns over the next 5 years. IMXI has grown transactions over 20% annually since 2018 through its focus on productive agents and client service. The author believes IMXI's approach and growth history differentiate it from other players in a price-driven industry. With upside to $31 even under conservative assumptions, the author sees IMXI as a compelling value opportunity.

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Charles Schwab (SCHW) is an investment services firm operating retail brokerage, banking, and asset management businesses. The analyst raises their fair value estimate from $70 to $80 based on increased confidence in Schwab's earnings growth trajectory after a period of pressure. As clients shifted cash from low-yielding deposits into higher yielding products like money funds, Schwab relied on more expensive funding like CDs, hurting net interest income. But the analyst believes these deposit outflows will stabilize around end of 2023, allowing Schwab to optimize funding costs again and boost net interest income. Schwab maintains competitive advantages from massive scale, industry-low expenses per client asset dollar, and operating margins in the 50s%. The analyst sees double-digit EPS growth for years after net interest income normalizes. Risks include interest rates, which drive about half of revenue, further deposit shrinkage, and fee pressures. But Schwab's wide moat stemming from cost leadership provides resilience. Given the outlook for profit growth and attractive valuation at 18.5x 2024 EPS, the analyst's rating remains Buy. Upside scenario is $120 per share, downside is $42. Schwab is seen well-positioned to continue gaining share in wealth management.

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The author is shorting Aurora Acquisition Corp (AURC), the SPAC taking Better.com public. Better is an online mortgage lender. The author believes AURC is worth $0.81 per share versus the current $32 price (price is now $27), representing 98% downside. The core bear case is:

1) Better's CEO Vishal Garg has a history of bankruptcies, fraud accusations, and deceit across his previous ventures. He is currently being sued for allegedly misappropriating tens of millions from investors.

2) Better is deeply unprofitable, with negative margins exceeding 300% in Q1'23. Volumes have plunged 90%+ from peak levels. The 2020 profitability was an anomaly driven by low rates. Sustained profitability appears implausible.

3) The current $24B valuation is 120x book value and absurd compared to similar mortgage lenders. AURC shareholders will own just 0.1% of Better's shares post-merger.

4) The merger unlocking 36% of Better's shares from lockup provides a near-term catalyst for a selloff and price rationalization.

The author expects a dramatic repricing downward following the merger close.

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Simon Property Group (SPG) is a retail REIT that owns high-end malls and outlet centers. The analyst reiterates a Buy rating and $140 price target on SPG. Second quarter results were hurt by higher expenses, but occupancy and base rents rose. SPG raised full year guidance slightly. Retail faces economic weakness, but premium centers are outperforming. SPG is redeveloping space and expanding internationally which should boost growth. The 6.3% dividend yield is the highest in coverage and has seen frequent raises. SPG does carry significant debt and faces interest rate risk. But with solid fundamentals and valuation metrics more attractive than peers, the analyst believes SPG can generate total returns. Upside could come from continued dividend growth, retail partnerships, and outlet strength overseas.

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PagBank (PAGS) is a Brazilian fintech providing digital banking and merchant acquiring services. The author makes a bullish case based on PagBank's leading position as the 2nd largest neo bank in Brazil and its full ecosystem of offerings for consumers and businesses. PagBank has grown clients 5x over 4 years, credit 7x, deposits 10x, and payments market share from 1% to 11% or $354B TPV. Compared to the US, Brazil has far lower credit card penetration at 55% versus 88-97%, signaling massive room for growth. PagBank is capitalizing with 40% revenue growth, outpacing competitors. Ecommerce is only 15% of retail now but expected to reach 70% by 2025, further fueling growth. Recent political changes and potential economic stimulus are tailwinds for consumer spending and PagBank. Financial ratios including P/E, P/S, P/B and debt/equity are more attractive than peers NuBank, PayPal, and Block. PagBank also has stronger net profit and operating margins. Execution risk is present given Brazil's volatility, but the author believes PagBank can continue gaining share with its unique full ecosystem and growth trajectory.

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Dish Network (DISH) is a satellite TV provider that has invested heavily in wireless spectrum licenses over the past decade. The analyst sees the company filing FCC paperwork to exercise its option to acquire $3.6 billion of 800MHz spectrum from T-Mobile as a positive incremental step towards resolving financing issues for the deal. While Dish wants the spectrum to support its wireless ambitions, its weak balance sheet makes funding the purchase difficult. However, the analyst believes it is in both Dish and T-Mobile's interests to find a creative solution, perhaps involving Dish spinning off its cash flow generating but declining satellite TV business. Risks for Dish include its eroding satellite TV business as consumers shift to streaming, building a wireless network and competing for customers against larger rivals, and FCC buildout deadlines and potential regulatory issues. But acquiring the T-Mobile spectrum is important for Dish's plan to become a facilities-based wireless carrier, albeit likely focused more on enterprises and niche segments than the mass market. Despite the many uncertainties in Dish's wireless pivot, the analyst maintains a $19 fair value estimate based on their expectation that Dish can carve out a profitable though small wireless business. While risks around Dish's strategy abound, resolving the T-Mobile spectrum purchase is an incrementally positive step.

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Pagaya Technologies (PGY) operates an AI-based lending network connecting loan originators and institutional investors. The author believes Pagaya is deeply undervalued, rating it a Strong Buy with significant upside. Pagaya's network has shown resilience during the Fed's rate hikes, maintaining volume and profitability. With a large TAM and tiny market share currently, Pagaya has a long growth runway ahead as AI adoption accelerates. Credit performance has also held up well. The author sees Pagaya achieving $27B in volume in the medium-term, generating nearly $1B in high-margin revenue. Even with conservative assumptions, intrinsic value is estimated at $7.33 per share, representing over 250% upside from the current $2.1.99 price. Risks include unproven AI models and potential recession impacts, but the author views Pagaya as a long-term winner in AI lending. Given the enormous disconnect between price and value, Pagaya offers highly asymmetric risk/reward.

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