TipRanks Smart Growth Portfolio #14: Edge of Credit
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Dear Investors,
Welcome to the 14th edition of the Smart Growth Portfolio and Newsletter.
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Portfolio News
❖ Backblaze (BLZE) has entered into a credit agreement with Citizens Bank, N.A., securing a $20 million senior secured revolving credit facility. This agreement, which includes various financial covenants and pledges, is intended to support the company’s working capital and general corporate purposes, potentially increasing its operational flexibility.
❖ Arlo Technologies (ARLO) has surpassed $300M in annual recurring revenue or ARR, driven by continued growth from subscription services delivered by Arlo’s AI-powered smart security platform. Arlo has achieved this in less than six years.
❖ Cellebrite (CLBT) announced its agreement to acquire Corellium, an Arm-based virtualization software provider, for an enterprise value of $170 million in cash with $20 million converted to equity at closing. The deal is expected to close this summer, subject to regulatory approval.
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Portfolio Updates
❖ We are placing Powerfleet (AIOT) under review for a possible sale from the Portfolio. While analysts remain bullish on the company’s long-term prospects – with several “Strong Buy” ratings still in place – recent price action signals that investor sentiment has diverged meaningfully from the optimistic forecast.
Ever since the April 8 market trough, AIOT has bucked the broader trend by grinding lower, underperforming peers like Samsara, which have rallied sharply. The disconnect appears company-specific. Most notably, on May 1, the stock triggered a technical “death cross,” where its 50-day moving average fell below its 200-day – a classic bearish signal. That setup has persisted into June, with AIOT still trading well below both averages as of Thursday’s market close.
The stock has also fallen in six of the past ten trading days, with no clear reversal pattern forming yet. Its Relative Strength Index (RSI) is now hovering around 38, inching toward oversold territory – but not quite flashing a buying signal. These factors suggest continued selling pressure, despite a fundamental backdrop that hasn’t materially changed since the merger with MiX Telematics.
We are not rushing to exit based on technicals alone. PowerFleet’s positioning in fleet IoT, telematics, and asset tracking remains promising, and the integration of MiX could still yield upside if synergy targets are hit. However, the market’s reaction may indicate deeper skepticism around execution or visibility.
Given these conditions, we will monitor AIOT closely over the next few weeks. A decisive move back above the 50-day average with rising volume would reset the thesis. Until then, the stock will remain under review as a potential cut from our Growth Portfolio.
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This Week’s Top Growth Pick: Atlanticus (ATLC)
Atlanticus Holdings Corporation is a financial technology company focused on expanding access to credit for underserved consumers across the United States. Through its Credit-as-a-Service model, Atlanticus partners with banks, retailers, and healthcare providers to deliver general-purpose credit, point-of-sale financing, and patient payment solutions to customers often overlooked by traditional lenders. The company combines over two decades of consumer credit experience with a fully cloud-based, AI-driven platform capable of real-time decision-making at scale. With a mobile-first interface and deep partner integrations, Atlanticus is quietly building a vertically integrated fintech stack tailored to the realities of middle-income America. In an era of tightened credit access and shifting consumer risk profiles, Atlanticus stands out by serving demand others overlook – positioning itself as a durable compounder in alternative credit and embedded finance.
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Credit Where It’s Due
Founded in 1996 and listed on the Nasdaq since 1999, Atlanticus Holdings began as a credit solutions provider focused on non-prime consumers. Early on, the company developed proprietary risk models and servicing tools, helping retail partners issue private-label credit products to underserved segments. For much of the 2000s and early 2010s, Atlanticus maintained a relatively low public profile – operating behind the scenes as an infrastructure partner to banks and merchants rather than a direct-to-consumer brand.
The past several years, however, have marked a clear inflection point. In 2019, ATLC launched its Credit-as-a-Service model – a cloud-native platform that enables partner banks to offer general-purpose credit, point-of-sale financing, and patient payment plans through embedded channels. This shift allowed Atlanticus to scale without assuming traditional balance sheet risk, transforming it into a modern fintech enabler.
Between 2020 and 2022, the company deepened its push into healthcare, automotive, and home improvement verticals, while expanding its flagship Fortiva and Aspire credit products. These offerings now span direct-to-consumer and partner-distributed models, supported by real-time underwriting and mobile-first servicing tools. A unified servicing platform, completed in 2023, streamlined operations across these channels – reducing friction for both end users and enterprise partners.
Technological investment has also ramped up. Atlanticus continues to refine its AI-driven underwriting and collections systems, while enhancing digital onboarding and fraud prevention across the lifecycle. The company now supports instant credit decisions, same-day card issuance, and real-time transaction monitoring – capabilities that help it compete with larger fintech firms.
While ATLC has been selective with M&A, it made targeted acquisitions in 2022 to strengthen its presence in elective healthcare and expand third-party integrations. Its partnerships with billing platforms, merchant POS vendors, and specialized finance providers now serve as strategic distribution points – widening its access to borrowers in traditionally underserved sectors.
From a niche credit facilitator to a vertically integrated fintech platform, Atlanticus has spent the last half-decade repositioning itself for scale – quietly capturing market share in segments others have exited or ignored.
Source: Atlanticus Holdings 2025 First Quarter Investor Presentation
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Flow State Finance
Atlanticus operates as a vertically integrated fintech platform focused on delivering credit to underbanked and non-prime consumers – a segment long overlooked by traditional lenders. Its core business is built around facilitating and servicing general-purpose, revolving credit through partnerships with banks, retailers, and healthcare providers. Unlike most neobanks or point-of-sale lenders, Atlanticus doesn’t just originate – it controls the full credit stack, including underwriting, decisioning, customer servicing, and collections.
The company generates revenue across three primary streams. First is finance charges and fees on consumer receivables, which make up roughly 86% of total revenue. These include interest income, late fees, annual membership charges, and interchange from cards issued through partner banks. This stream is inherently recurring and expands as receivables grow – a model that gives Atlanticus revenue leverage on both volume and time.
Second is servicing income, which contributes about 12% of revenue. This includes fees from managing credit programs on behalf of partner institutions and white-labeled offerings. The company’s cloud-based platform handles everything from risk scoring to payment processing – positioning ATLC as a fintech infrastructure provider, not just a lender.
A small (~2%) but growing third stream – ancillary product revenue – includes value-added services like identity protection, credit monitoring, and premium payment options. These high-margin offerings are often bundled into the user experience and deepen customer engagement.
What sets Atlanticus apart is its ability to profitably serve consumers that fall below the prime threshold – a demographic that accounts for nearly half of U.S. adults. The company uses over two decades of proprietary credit data and real-time machine learning models to underwrite these users with precision. Its ability to do this at scale – without assuming the full regulatory burdens of a bank – gives it structural cost advantages over both traditional issuers and newer BNPL players.
ATLC is playing in a market with a total addressable size estimated at $140-160 billion in non-prime consumer revolving credit in the U.S. alone. Its current share is still modest, with less than 2% penetration – leaving ample headroom for growth. As lending standards tightened and banks retreated from subprime segments, Atlanticus was left with a widening runway – expanding through both direct channels and embedded finance partnerships.
This isn’t a race to the bottom – it’s a race to serve the middle. And Atlanticus is doing it with better data, faster infrastructure, and fewer balance sheet constraints than legacy lenders.
Source: Atlanticus Holdings 2025 First Quarter Investor Presentation
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Profits in Plain Sight
Atlanticus opened 2025 with momentum, delivering $344.9 million in revenue – up 18.9% year-over-year and comfortably ahead of Street expectations in the $330-335 million range. The beat was driven by steady growth in both general-purpose and private-label credit products, along with rising fee income tied to embedded finance partnerships and a larger active account base.
Earnings followed suit. GAAP EPS climbed to $1.49, up from $1.09 a year earlier, topping analyst forecasts of around $1.42. That makes twelve straight quarters of GAAP profitability – a rarity in consumer fintech – and the fifth in a row with EPS growth north of 25%. Net income attributable to shareholders surged 40.5% to $27.9 million, helped by both top-line strength and improved operating efficiency across servicing and technology.
Receivables, the core revenue engine, ended Q1 at $2.7 billion, up nearly 17% YoY, while active accounts rose by over 415,000 in the quarter alone. Importantly, this growth wasn’t fueled by looser credit standards. Atlanticus continued to apply tightened underwriting rules introduced in 2023, and delinquency and charge-off levels remained well within historical norms – even as newer cohorts began seasoning. The model isn’t just growing – it’s holding up under pressure.
The balance sheet remains in solid shape. Unrestricted cash stood at $350 million, down slightly from Q4 but still providing ample liquidity to fund receivables growth, service debt, and invest in platform expansion without needing to tap external markets. This level of true liquidity gives ATLC flexibility rare among subprime-focused lenders – especially in a tightening capital environment.
Shareholders’ equity climbed to $532.7 million, an 8% sequential gain, and return on equity (ROE) remained near 20%, underscoring the model’s capital efficiency even at scale. Free cash flow wasn’t broken out for the quarter, but margin commentary was constructive. Operating leverage continues to improve as more partners migrate to the company’s unified servicing infrastructure, while SG&A growth remains well below the pace of revenue.
Looking ahead, Atlanticus reaffirmed its full-year outlook for mid-teens revenue growth and continued earnings expansion, citing a healthy pipeline of new merchant and financial institution partners. Analysts currently forecast 2025 revenue of $1.5 billion and EPS of $6.10-6.30 – representing approximately 14% revenue growth and 28-32% earnings growth over 2024.
This isn’t a story about break-even hopes or adjusted EBITDA optimism. ATLC is already profitable, already compounding, and now has a structural growth engine powering it forward – even before broader credit cycles turn in its favor.
Source: Atlanticus Holdings 2025 First Quarter Investor Presentation
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Compounder in Disguise
Atlanticus’ stock has delivered a gain of over 80% in the past year, leaving broad indexes and most of its competitors in the dust – despite giving back about 23% after peaking in December 2024. Following a stretch of tariff-induced volatility, ATLC found its footing again after bottoming in March and seems to have resumed an upward trajectory.
Despite that outperformance, the stock still trades at compellingly low valuations. Its trailing and forward GAAP P/E ratios, along with its PEG ratio, sit below the average for the Financial sector – let alone Technology benchmarks. And as a fintech straddling both, Atlanticus offers operational leverage typical of software platforms while delivering real cash earnings. Within the credit-focused fintech group, ATLC’s P/E remains below median, while its PEG ratio lands near peer average – despite a cleaner, more consistent P&L than most.
More striking is its valuation on free cash flow: Atlanticus trades at below 1.5x trailing FCF, despite consistent GAAP profitability, double-digit growth, and 20%+ ROE. That’s an extremely rare combination – not just among fintechs, but across the small-cap equity universe. On this metric, it’s dramatically cheaper than sector averages and every peer except one: Oportun, which trades at a similar multiple but carries far greater credit risk, sustained net losses, and weaker returns.
Atlanticus’ low valuation appears less a reflection of business fundamentals and more a byproduct of other factors – namely, high insider ownership (limiting float) and broad investor caution around non-prime lending. But that caution overlooks how ATLC actively manages credit exposure: the company leverages over 20 years of proprietary data and real-time, AI-powered models to underwrite with exceptional precision. This enables it to segment risk at scale and maintain strong credit performance in a borrower segment others write off.
These same misperceptions create opportunity. Atlanticus is a profitable, cash-rich, capital-efficient compounder that remains mispriced by a market still painting with too broad a brush.
Alongside this growth-for-value setup, ATLC has also supported shareholder returns through opportunistic buybacks. Its current repurchase program, approved in May 2024, authorizes up to 2,000,000 common shares through June 30, 2026. In 2024, Atlanticus repurchased $2.2 million worth of stock, and followed that with another $1.25 million in Q1 2025.
With free cash flow consistently over $110 million per quarter and valuation multiples near historic lows, these buybacks are highly accretive. Management continues to view the stock as undervalued relative to intrinsic value – making repurchases a rational, disciplined use of internally generated capital and a meaningful component of the company’s long-term value strategy.
Wall Street remains bullish: analysts currently rate Atlanticus a “Strong Buy,” with a 12-month average price target implying more than 45% upside from current levels.
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To Sum It All Up
Atlanticus is a vertically integrated fintech platform bringing modern infrastructure to non-prime consumer credit. Operating at the intersection of finance and technology, the company combines deep data, real-time AI underwriting, and embedded distribution to serve an underserved segment with precision and scale. Its platform spans origination, servicing, and collections – delivering consistent profitability without taking on traditional bank risk. With a growing partner network, expanding vertical reach, and disciplined capital allocation, Atlanticus is quietly emerging as a high-ROE compounder in a market others avoid. For investors seeking exposure to cash-generative growth outside the usual SaaS playbook, Atlanticus offers a durable, tech-enabled model mispriced by conventional lenses – and leveraged to structural shifts in consumer credit and embedded finance.
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Smart Growth Portfolio
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Click here for more stock analysis from TipRanks Macro & Markets research analyst Yulia Vaiman
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Disclaimer
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