Pagaya's AI Lending Model Fuels Growth, But Competition and Credit Risks Loom
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Pagaya has an excellent business model providing AI-based credit analysis to lenders like Visa and SoFi. It charges fees but takes no loan risk.
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Strong tailwinds as banks want to limit credit risk exposure and prefer securitizations. Pagaya is a leader in securitizations.
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Concerns include competition, credit cycles worsening impacting volumes, and risks from acquisitions or keeping loans.
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Financial performance improved in 2023 with record network volume, revenue growth, and $28M Q3 adjusted EBITDA.
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Upside could be 4x in 5 years given growth potential and cheap valuation at 1x sales with significant cash.