VPC Impact Acquisition Holdings (VIH) stockholders have approved the business combination with Bakkt. The merged entity will start trading under the ticker symbol "BKKT" on Oct. 18. The stock is trading higher in premarket price action. What’s the forecast for Bakkt stock and how high can it go?
Bakkt is a fintech company and calls itself a “trusted digital asset marketplace that enables consumers to buy, sell, store and spend digital assets.” The company helps consumers and businesses unlock digital assets.
What does Bakkt do?
While we tend to use cryptocurrencies and digital assets interchangeably, Bakkt also adds NFTs, reward points, gift cards, and in-game assets to digital assets. According to the company, there's currently $1.6 trillion of such digital assets that aren't interchangeable.
Bakkt helps increase the liquidity in digital assets and boasts of 500,000 early-access customers and 250 merchant partners. The company also has almost 100 institutional clients.
How much money has BKKT received as part of the merger?
As part of the merger, Bakkt would receive $447 million of gross proceeds. This includes a PIPE investment of $325 million and the remaining is $122 million held in the SPAC trust account. The cash is only about 60 percent of the funds currently with the SPAC because the other stockholders have opted for a redemption. Over the last few months, there has been a flurry of redemption during the SPAC merger voting.
BKKT stock forecast
The forecast for Bakkt stock looks positive considering the pivot towards digital assets. The company also has a strong management team and is backed by NYSE owner ICE (Intercontinental Exchange) as well as Starbucks and Microsoft. ICE also contributed $50 million to the PIPE transaction.
BKKT expects its SAM (serviceable addressable market) to rise at a CAGR of 26 percent between 2020 and 2025 and reach $5.1 trillion. The company sees its total addressable market as even higher after accounting for international expansion, increased asset digitization and retail participation, and equity and fractional share trading.
The company helps aggregate digital assets which can be interchanged. It allows users to use digital assets to pay for online purchases as well as P2P. The app also allows users to redeem their digital assets.
Bakkt stock valuation
Bakkt is projecting its total active users to rise above 30 million by 2025 and growing at a CAGR of 36 percent between 2021 and 2025. In 2025, it expects to post revenues less transaction-based expenses of $515 million and an average revenue per active user of $210. Bakkt expects its adjusted EBITDA margin to be 55 percent in 2025, which looks healthy.
For 2021, BKKT is forecasting an EBITDA loss of $184 million but expects to turn EBITDA positive by 2023. In 2025, the company expects its adjusted EBITDA to be $285 million. The deal valued BKKT at an EV of around $2.1 billion. After adjusting for the SPAC redemptions, the EV comes to just under $2 billion.
Based on the 2025 projected EBITDA of $285 million, we get a 2025 EV-to-EBITDA of around 6.6x, which looks reasonable. The forecasts provided during the SPAC merger should always be taken with a pinch of salt. There have been multiple instances when companies had to tone down the projections. Bakkt stock looks a good buy at these prices. BKKT stock is trading higher in premarkets on Oct. 18 and might continue to rise more from these levels.