YB new stock pitches (Tue, Dec 10)

VersaBank (VBNK) experienced a Q4 miss due to delays in the US RPP program rollout, resulting in adjusted EPS of $0.38 CAD. The company holds $525M in cash for CMHC and US RPP expansion. CMHC loans are expected to reach $600M by 2024, offering 100% government-backed returns. The US RPP program aims to boost ROE through syndication, targeting 20-25% ROE compared to 13-14% in Canada. This improvement is due to higher US NIM (3% vs 2% in Canada) and potential 1% servicing fees from community bank partnerships. VBNK is currently trading at 12x Canadian run-rate earnings, with US growth potential not priced in even with the company recently transferring $90M in equity to its US arm, signaling imminent program launch. Despite the market's impatience, VBNK's growth prospects in both Canada and the US present an attractive investment opportunity.

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Pinterest (PINS) is undergoing a transformation under new CEO Bill Ready, pivoting from a retailer model to an advertising-based platform leveraging its 530M monthly active users' data. The company's Q3 revenue grew 12.8% year-over-year, outpacing user growth, indicating improved monetization. PINS aims to achieve 30% Adjusted EBITDA margins in 2-4 years, with a bull case projecting $1.2B free cash flow by 2025. The company's unique position allows for targeted advertising with 45% higher return on ad spend and 2x higher conversion rates compared to peers. However, high stock-based compensation remains a concern, causing about 3% annual dilution. With continued 15% annual revenue growth, PINS could reach a $55 price target by 2027. Investors should watch for entry points below $30 per share, considering the company's execution of its new strategy and the potential for increased operating leverage.

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Five Below (FIVE) is a unique teen-focused dollar store concept with a treasure hunt appeal, trading at 23.3x P/E, closer to TJX and Ross than Dollar General and Dollar Tree. The company reported strong Q3 results with a 15% sales increase and 82 new store openings. FIVE targets 3,500 stores, currently operating 1,771, and maintains robust financials with a 35% gross margin and 9% operating margin. The company's moat includes its appeal to young customers with discretionary income, resistance to online competition due to low-price items, and a treasure hunt shopping experience similar to off-price retailers. Risks include debt (3.9x D/EBITDA), potential tariff impacts, and a potential slowdown in discretionary spending. Despite recent challenges, including a CEO departure and disappointing comparable store sales, FIVE's Q3 performance and unique positioning make it an attractive turnaround play with a strong moat in the retail sector.

Read the full article here. Read time: 8 min