TipRanks Smart Growth Portfolio #46: On All Accounts
Dear Investors,
Dear Investors,
Welcome to the 46th edition of the Smart Growth Portfolio and Newsletter, where we spotlight a behind-the-scenes AI platform orchestrating credit decisions and funding at scale. But first, some news and updates.
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Portfolio News
❖ Micron (MU) received a new Street-high price target. Lynx Equity – an independent research firm specializing in technology stocks – raised its PT from $325 to $550, keeping a “Buy” rating. The upgrade is driven by Lynx’s bullish outlook for continued surging demand from AI infrastructure and inference workloads.
The firm’s bull case is built on the transition of MU’s valuation from a cyclical “commodity” memory play to a long-term AI infrastructure play, focusing on inference workloads and the massive build-out of data centers. Lynx forecasts strong multi-year growth, with Micron’s revenue potentially doubling between FY2026 and FY2028, driven by a 40% CAGR in the HBM market. Meanwhile, the memory maker is expected to see its non-GAAP EPS surging from the consensus estimate of $29-32 for fiscal 2026, to about $62 by FY2028.
Analysts assume a multi-year earnings expansion fueled by tight supply persisting beyond 2026, leading to significant margin expansion. Beyond the short- to medium-term gains from memory shortages, longer-term growth will be driven by capacity expansion following continued fab ramps. The company is already hiking its capex, and Lynx expects it will double year-over-year in FY2027 as there is little choice but to invest heavily to meet the extraordinary demand. In short, Lynx is betting big on Micron becoming a massive earnings powerhouse by FY2028 thanks to the AI infrastructure buildout.
Cantor Fitzgerald, Barclays, Citi, KeyBanc, Wells Fargo, and Bank of America Securities have also hiked their price targets on MU over the past week, while sounding bullish on MU’s short- and long-term prospects. Micron’s stock has received an additional boost from the strong earnings posted by the foundry giant Taiwan Semiconductor, which sparked a broader rally across chip stocks.
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❖ The Smart Growth Portfolio’s newest holding, CommScope, has rebranded – including a name and a ticker change – following the divestiture of its legacy Outdoor Wireless Networks (OWN), Distributed Antenna Systems (DAS), and Connectivity and Cable Solutions (CCS) segments to Amphenol, with the last one completed on January 12.
The proceeds from the CCS sale will be used to repay all outstanding debt and redeem all preferred equity, held by Carlyle, with significant excess cash remaining after that slated to be distributed to shareholders as a dividend, amounting to at least $10 per share.
After the split, the company is now anchored by two growth engines: Access Network Solutions – now rebranded as Aurora Networks – which provides infrastructure for multi-gig broadband rollouts, and RUCKUS Networks, a cloud-managed platform for enterprise wireless, Wi-Fi, switching, and connectivity in high-demand settings. The streamlined entity emerging from the divestiture is centered on next-generation broadband access and enterprise/cloud-managed wireless networking, positioning it squarely in the “picks and shovels” of the data-center and broadband supercycle, supporting AI, fiber optics, and telco growth.
As part of the deal, the “CommScope” name and brand are transferring to the CCS business now owned by Amphenol, while the parent company is rebranding to Vistance Networks, Inc. (VISN) to better communicate its vision, strategy, and market position.
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❖ MKS Inc. (MKSI) has received strong analyst support, with Needham rising its price target to $210 and BofA and Mizuho hiking to $215. Meanwhile, KeyBank has raised its PT from $180 to $250, a new Street high. Analysts cite strong execution, visible through a string of beat-and-raise quarters, as well as positive momentum in Semiconductor and Electronics & Packaging end markets, fueled by AI-driven demand and improving wafer fab equipment (WFE) spending outlook into 2026. The PT increases also reflect increased conviction in MKSI’s long-term growth potential, as the company’s broad portfolio positions it well for expansion in logic, DRAM, HBM, and related areas.
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This Week’s Top Growth Pick: Pagaya (PGY)
Pagaya Technologies Ltd. is a fintech company using AI to rethink how consumer credit decisions are made. Its platform plugs directly into lenders’ existing workflows, analyzing large and diverse data sets to help approve more borrowers without losing sight of risk. Pagaya does not lend itself – it operates as an intelligence layer behind the scenes, enhancing underwriting across personal loans, auto finance, and point-of-sale credit. Sitting at the crossroads of machine learning, consumer finance, and capital markets, the company connects lenders looking to expand responsibly with investors seeking data-driven credit exposure. As lending becomes more digital, automated, and model-driven, Pagaya positions itself as the technology backbone enabling smarter, faster credit allocation at scale.
Source: Pagaya Technologies Ltd. Website
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Crediting The Curve
Pagaya’s origins go back more than a decade, but the company that exists today was largely shaped over the past five years. Founded in Israel with a focus on applying machine learning to credit risk, Pagaya initially operated as a niche technology provider helping lenders better price and approve consumer loans. The early years focused on building models, proving performance, and earning trust in a highly regulated and conservative industry. That groundwork mattered, but the real inflection came as Pagaya began scaling beyond experimentation and into infrastructure – and as it increasingly positioned itself as an Israeli-American fintech operating throughout both markets.
From roughly 2020 onward, PGY shifted from being a promising AI vendor to becoming a core underwriting partner for large consumer lenders. The company expanded its product coverage beyond personal loans into auto finance, point-of-sale credit, and revolving products, broadening both its addressable market and relevance across the consumer credit stack. At the same time, it invested heavily in data ingestion, model iteration, and automation – moving toward continuous-learning systems that adapt across credit cycles rather than static scorecard-style decisioning.
A defining step in this evolution was Pagaya’s increasing integration with major financial institutions and platforms. Partnerships with lenders and fintechs such as SoFi, Ally Financial, U.S. Bank, OneMain Financial, Best Egg, and Upgrade helped validate its models at scale, while relationships with payment networks like Mastercard and Visa, alongside embedded-finance platforms such as Affirm and Klarna, expanded distribution into everyday consumer transactions. These integrations positioned PGY less as a bolt-on tool and more as a behind-the-scenes operating layer for credit approval.
Selective acquisitions also played a supporting role in Pagaya’s evolution. In 2024, the company acquired Theorem Technology, adding seasoned U.S.-based underwriting and asset-management expertise, and separately purchased key intellectual property from Tally Technologies alongside LendingClub, expanding its capabilities in credit optimization and embedded consumer finance.
Capital markets access was another key pillar. Over the past five years, Pagaya deepened its connections with institutional investors and structured credit buyers, including global asset managers such as BlackRock, Allianz, GIC, and Magnetar Capital, strengthening its ability to fund approved loans without holding long-term balance-sheet risk. This dual-sided model – serving lenders on one end and investors on the other – reinforced network effects and helped the platform scale through varying macro conditions.
The company’s transition into a public, cross-border operator marked another turning point. Pagaya went public on Nasdaq in 2022, cementing its U.S. presence, and later added a listing in Israel – formalizing its evolution from a local Israeli startup into an Israeli-American fintech with global ambitions. While volatile at times, this period pushed Pagaya to refine its positioning, sharpen execution, and focus on durable partnerships rather than growth at any cost.
Today’s Pagaya is the product of that transition – a company shaped by years of model development, expanded product reach, deeper institutional ties, and a clear shift from a domestic AI experiment into a globally embedded credit infrastructure platform.
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Money Infrastructure
Pagaya Technologies functions like a toll road for modern credit origination – embedded into lending and commerce flows, invisible to consumers – and paid every time traffic moves across it. Rather than acting as a lender or a consumer-facing fintech, PGY operates credit infrastructure that sits between originators and institutional capital, using AI-driven decisioning to route, approve, and fund credit efficiently at scale.
At the core of the business is Pagaya’s AI underwriting and allocation platform, which integrates directly into banks, fintechs, auto lenders, and merchant platforms via APIs. Partners can route a broad range of applications through PGY’s models, which analyze thousands of variables across a massive historical dataset of consumer credit outcomes to assess risk, pricing, and eligibility in real time. When approved through the platform, loans are originated by partners and funded by institutional capital, not Pagaya’s balance sheet. The company earns transaction-based and performance-linked fees for enabling that flow.
Importantly, while PGY has long evolved from “declined-only checker” to a one-stop shop capable of processing any application flow a partner chooses to route through it, it does not replace a lender’s primary underwriting across all applications by default. In practice, some partners route all applications through PGY for scoring, pricing, or risk segmentation, but only originate a subset via Pagaya-funded channels. Meanwhile, most use Pagaya’s platform in a selective, targeted way, deploying its AI-driven processes for incremental approvals, where the economic value is clearest and the ROI is highest.
Personal loans remain Pagaya’s largest business line today, accounting for the majority of network volume and revenue. This segment benefits from deep integrations with existing partners, multi-product adoption, and prescreening and marketing tools that allow lenders to approve more borrowers without increasing acquisition costs. Growth here is increasingly driven by wallet-share expansion within existing relationships, as partners route a larger share of their credit activity through Pagaya rather than relying on constant new partner additions – resulting in a more recurring, SaaS-like usage profile over time.
Auto lending has emerged as the second pillar and is scaling faster than personal loans. The auto market remains structurally under-digitized, with fragmented dealer workflows and inconsistent underwriting standards. PGY’s embedded decisioning allows lenders to increase approval rates at the dealership while maintaining discipline. On the investor side, strong institutional appetite for Pagaya-screened auto loans has removed funding bottlenecks, allowing this segment to grow steadily and contribute a larger share of overall volumes.
Point-of-sale financing is the smallest segment today, but also the fastest growing. Pagaya does not operate a consumer BNPL brand – it provides the infrastructure that enables installment and deferred-payment options at checkout for merchants, banks, and platforms. The same decisioning and capital-routing engine used in loans is applied at the point of transaction, expanding Pagaya’s reach beyond traditional credit funnels into everyday commerce. This meaningfully enlarges the addressable market and increases transaction frequency across the platform.
Across all segments, PGY’s capital markets platform – which structures and distributes partner-originated loans to institutional investors – is a critical enabler. The company facilitates funding through securitizations, forward-flow agreements, and pass-through structures, occasionally warehousing assets briefly as part of execution while avoiding long-term balance-sheet exposure. This model allows Pagaya to scale volume without capital intensity and remain resilient across credit cycles.
While only a portion of the U.S. consumer lending, which exceeds $1 trillion in annual originations, is addressable by third-party decisioning and funding infrastructure, that addressable slice still spans hundreds of billions of dollars across personal loans, auto, and embedded finance. Pagaya’s current share remains small, but once integrated, partners face high switching costs, long onboarding cycles, and growing reliance on PGY’s models across multiple products. That dynamic reinforces network effects and makes growth increasingly driven by deeper usage rather than constant expansion.
Policy tailwinds provide incremental support. The restoration of immediate R&D expensing and other pro-investment measures under the current U.S. fiscal framework improve cash efficiency for AI-driven software platforms like Pagaya, effectively subsidizing continued model development and platform innovation. More importantly, PGY’s combination of recurring partner relationships, scalable fee economics, diversified funding access, and a growing product suite, positions it to gain share steadily as lenders seek higher approval rates without higher risk.
Source: Pagaya Technologies Ltd. Investor Presentation, November 2025
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Numbers Of Interest
Pagaya’s financial profile has shifted decisively over the past year from recovery to execution, with 2025 results showing not just growth, but improving earnings quality and balance-sheet resilience. That transition was evident again in the most recent quarter, as Q3 2025 delivered record network volume of $2.8 billion, up 19% year-over-year – with a significant 31% growth in personal loans – alongside accelerating monetization and a further step up in profitability. These results reinforce that the company has moved beyond a transitional phase and into a scalable operating model.
Revenue and total income in Q3 reached $350 million, representing 36% year-over-year growth, materially outpacing network volume expansion. That spread is critical. It reflects higher fees per unit of origination, deeper multi-product adoption, and a growing mix of higher-margin activity rather than volume-driven growth alone. Fee revenue less production costs (FRLPC) rose to $139 million, up 39% year-over-year, with FRLPC margin expanding to a record 5.0%, compared with 4.8% in the prior quarter. PGY beat revenue estimates for the second quarter in a row – a pattern that signals improving forecast reliability.
Profitability followed the same upward trajectory. Adjusted EBITDA reached a record $107 million in Q3, up 91% year-over-year, with margins expanding to 30.6% from 21.8% a year earlier. Operating leverage was clear, as core operating expenses declined to 34% of FRLPC, the lowest level since Pagaya became public. On a GAAP basis, the company reported net income of $23 million, marking the third consecutive quarter of GAAP profitability.
Pagaya achieved non-GAAP profitability in early 2023, but earnings quality and scale improved materially beginning in late 2024 and accelerated through 2025, as higher monetization, sharply lower impairments, and structurally lower funding costs began to outweigh residual credit-cycle noise. In Q3 2025, non-GAAP adjusted EPS surged 132% year-over-year to $1.02 versus consensus around $0.66, exceeding analyst expectations for the third consecutive quarter.
Credit performance has been a key stabilizer. Credit-related impairment losses declined by more than $95 million year-over-year in the first nine months of 2025, reflecting better-performing loan vintages and improved underwriting accuracy. In Q3 alone, impairment losses fell to $18.6 million, down from $81.8 million a year earlier. This reduction boosted margins and reduced earnings volatility, while approval rates remained disciplined near 1%, even as application flows increased 12% sequentially.
Capital structure improvements added further support. Pagaya completed a $500 million senior unsecured notes issuance and expanded its corporate revolving credit facility to $132 million, adding four new banks at lower rates. Management confirmed these actions will deliver approximately $12 million in annual interest savings once fully phased in. Despite a $25 million one-time refinancing outlay in Q3, interest expense declined sequentially to $22 million, with cash flow benefits expected to build into 2026. Liquidity also improved following collateral releases in excess of $100 million, without increasing net leverage.
Operating cash flow reached a record $67 million in the quarter, translating to a 19% margin, and free cash flow was approximately $60 million after minimal capital expenditures. PGY ended Q3 with $265 million in cash and equivalents, maintaining a capital-light balance sheet with minimal long-term loan exposure.
Guidance was raised again following Q3. Management now expects full-year 2025 revenue of $1.3-1.325 billion, adjusted EBITDA of $372-382 million, and GAAP net income of $72-82 million, with network volume guided to $10.5-10.75 billion. At the midpoint, this implies roughly 60% year-over-year revenue growth, sustained margin expansion, and earnings well ahead of prior expectations. Meanwhile, analyst consensus sees full-year 2025 non-GAAP adjusted EPS at $3.09, implying approximately 236% year-over-year growth.
Taken together, Pagaya’s financials now reflect a business scaling with discipline – growing faster than volumes, generating real cash, and compounding profitability.
Source: Pagaya Technologies Ltd., 3Q 2025 Earnings Presentation
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Working The Math
Pagaya operates within a relatively small and emerging group of fintech infrastructure companies focused on AI-driven credit decisioning and funding orchestration, rather than consumer-facing lending or balance-sheet finance. Its closest peers are platforms that sit between originators and institutional capital, monetizing underwriting intelligence and workflow automation instead of interest spreads. Upstart is the nearest pure-play comparison, sharing Pagaya’s AI underwriting focus across personal and auto loans, but with meaningfully higher historical balance-sheet and funding-cycle exposure. Open Lending offers a tighter auto-focused analogue with a capital-light enablement model. LendingClub provides a maturity benchmark for marketplace lending, while Affirm adds context around point-of-sale credit economics despite operating a fundamentally consumer-facing model.
Stock performance across PGY’s closest fintech peers has sharply diverged over the past year, underscoring a clear market split between platforms that have delivered a clean profitability inflection and those still exposed to balance-sheet or credit-cycle volatility. Upstart and Open Lending dropped sharply, weighed down by tighter underwriting, volume pressure, and higher sensitivity to funding conditions. LendingClub and Affirm posted more resilient gains, reflecting steadier execution but slower reacceleration – still nowhere near PGY’s nearly 170% advance.
That performance includes PGY’s 40%+ drawdown from late September through November, driven by profit-taking and a broader de-risking of high-beta fintech and AI-linked stocks rather than any company-specific deterioration. The subsequent rebound reflected a reassessment of Pagaya as a profitable, capital-light infrastructure platform rather than a speculative AI lender. Overall, the dispersion highlights how aggressively markets rewarded earnings durability, operating leverage, and funding resilience – areas where PGY has clearly distinguished itself. Against that backdrop, analysts now project over 90% upside for the “Strong Buy”-rated stock, reinforcing the view that the re-rating is structural, not cyclical.
Meanwhile, PGY’s valuations remain moderate, with trailing and forward non-GAAP P/E and Price/Sales multiples the lowest in the peer group. Its trailing and forward EV/Sales and EV/EBITDA sit well below peer averages. Moreover, based on analyst non-GAAP EPS growth consensus, Pagaya’s forward PEG ratio sits near 0.03x – extremely low and consistent with a stock that has not yet been fully re-rated despite a sharp profitability inflection.
Looking ahead, continued execution on profitability, sustained credit performance, and further expansion across auto and point-of-sale flows would reinforce Pagaya’s positioning as infrastructure rather than cyclical fintech. If that narrative holds, valuation convergence toward peer averages – rather than multiple compression – becomes the dominant medium-term risk–reward driver.
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To Sum It All Up
Pagaya is a growth story built for the next phase of consumer credit – one defined by intelligence, efficiency, and capital discipline rather than balance-sheet scale. What began as an AI underwriting specialist has evolved into a full-stack credit infrastructure platform, embedded quietly across lending, auto, and commerce flows. Its advantage is structural: better decisioning drives higher approval rates, which attracts institutional capital, which in turn deepens partner reliance and reinforces the network. Execution now shows that this flywheel is working, with profitability and resilience validating the model. Yet the market still tends to view Pagaya through the lens of volatile AI lenders, not durable financial infrastructure. As adoption broadens and wallet-share deepens, Pagaya is positioned to compound growth steadily – monetizing more traffic without owning the risk, and scaling as one of the invisible backbones of modern credit.
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Smart Growth Portfolio
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Disclaimer
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