FirstCash Stock Has A 40% Upside Driven By Recovery In Consumer Spending

FirstCash Stock Has A 40% Upside Driven By Recovery In Consumer Spending

We believe that FirstCash's stock (NASDAQ: FCFS) has an upside potential of 40% in the next 1-1.5 years, once consumer spending recovers to the pre-Covid-19 levels. FirstCash, an international operator of over 2,700 retail pawn stores in the U.S. and Latin America, trades at $60 currently and has gained 15% in value so far this year. It traded at a pre-Covid high of $85 in February 2020 and is 30% below that level now. Also, FCFS stock has further lost 6% from the low of $63 seen in March 2020, after the multi-billion dollar stimulus package announced by the U.S. government, which has helped the stock market recover to a large extent. The stock is lagging the broader markets by a huge margin (S&P 500 is up about 70% since March lows), as investors are concerned about recovery in the origination of new pawn loans and lower inventory levels of retail merchandise, due to the drop in consumer spending.

Although FirstCash has reported better than expected EPS over the last four quarters, its revenues tell a different story. Its cumulative nine months revenues fell by 9% y-o-y to $1.2 billion, primarily driven by an 18% drop in pawn loan fees.