Yodlee: Pioneer in FinApps

08/07/2015 7:00 am EST


Tyler Laundon

Editor, Cabot Small-Cap Confidential

Consumers are turning to Web-based financial applications—or FinApps—in droves to handle banking, investment management, loan fulfillment, and other financial and transactional-related activities, explains Tyler Laundon, growth stock expert and editor of Game Changers.

Editor's note: Investors should be aware that three days after this article appeared, the company received a buyout offer. Tyler Laudon continues to hold the shares hoping for a higher offer, but he no longer recommends purchase for those who do not yet own the shares.

There is little doubt in my mind that the digital age of financial services is upon us. How many financial applications do you have on your smartphone or tablet right now?

You might think every company with a financial application has developed it in-house. But that’s not the case. It’s simply not practical or economical.

Companies are increasingly turning to specialists who design and maintain software platforms that power their custom solution.

So there exists a massive market for a cloud-based hub of financial applications and developers that can aggregate all the data from participating customers and spit it back out in a user-friendly and secure way.

One of the up-and-comers in this very specialized field is Yodlee (YDLE) and it’s a pioneer in the FinApps industry.

Yodlee has a market cap of just $408 million. It went public in October 2014 and few people are aware of it…yet. There is little media coverage. But I expect this is going to change.

Yodlee has developed the Yodlee Financial Cloud, a secure platform that powers a growing set of FinApps. The company has designed its platform to be easily customized to suit the needs of a particular business customer.

This is one of the keys to the company’s rapid growth; even though each financial institution requires its own applications, they are all based on Yodlee’s common set of building blocks.

It services the small business, retail banking, and wealth management industries. And its products span money and risk management, mobile solutions, big data, and money movement.

Yodlee counts 11 of the 20 largest US banks as customers. And though it has over 850 financial institutions as current clients, this is still only around 12% of the financial institution-specific market.

Yodlee’s platform connects directly to over 14,000 data sources and 20 billion end users, meaning it is pulling in a massive data set from which to power analytical solutions for clients.

This data can be screened, cleaned, and packaged into analytics reports that show anonymous spending and behavioral patterns.

This is an off-the-radar small-cap stock that has a very compelling business model. The company is not yet profitable, but it’s making progress and it should deliver positive non-GAAP earnings in the current year.

The stock has at least 30% upside potential over the next 12 months. But looking further outmdash;and given the truly game-changing technology—Yodlee has multi-bagger potential.

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