Points International Stock Primed for Major Breakout

Points International stock
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Points International Stock on the Verge of a Technical Breakout

Retailers of goods and services are always on the hunt for strategies to attract and retain customers. This is how small companies grow and flourish. One of the most effective methods that companies use to achieve this objective (besides offering discounts) is the establishment of loyalty programs.

The use of loyalty programs is especially popular in the airline sector. For instance, when you book a flight, you are eligible to receive a specific amount of points that can then be used toward future travel or products.

The aim is to give you a reason to come back as a customer and spend more.

This is where Points International Ltd. (NASDAQ:PCOM) comes in. It’s one of the emerging players in the global loyalty management segment.

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Points International’s “Loyalty Commerce Platform” enables clients (such as airlines) to offer a back-end solution and loyalty programs.

If you are a member of a loyalty program, there’s a good chance that the operation behind it is provided by Points International. The company’s client list includes more than 65 of the world’s major loyalty brands. These include airlines, hotels, credit cards, and retailers.

Points International counts as its clients seven of the biggest 10 airlines in North America, two major airlines in Europe, and two airlines in the Middle East.

As you can see in the chart below, PCOM stock had been languishing recently, but it is currently displaying a bullish rounding bottom formation with a potential breakout toward $15.00–$16.00.

Chart courtesy of StockCharts.com

Points International stock is up 49% over the past three months and could take a run at its 52-week high of $18.48, representing a further 37% move.

The downside risk for PCOM stock is approximately $12.00. Failure to hold this could see weakness down to $10.00–$11.00.

The Fundamental Picture Looks Positive for PCOM Stock

Points International Ltd. has increased its revenue in the last four consecutive years, from $254.9 million in 2014 to $376.2 million in 2018. That represents a compound annual growth rate (CAGR ) of 10.2%.

Fiscal Year Revenue (Millions)
2014 $254.9
2015 $296.3
2016 $321.6
2017 $348.6
2018 $376.2

(Source: “Points International Ltd. (PCOM),” Yahoo! Finance, last accessed March 22, 2019.)

Along the way, Points International reported record gross profits in 2018 and managed to expand its gross margin.

The company has achieved revenue growth in three of the last four years. Points International’s earnings came in at $7.8 million ($0.54 per diluted share) in 2018, up 131% year-over-year.

The company has also been generating positive free cash flow, with $18.2 million in 2018, up 21% compared to 2017. (Source: Ibid.)

Analyst Take

While Points International stock has recently staged a strong technical move, the company’s fundamentals support a higher share price on the horizon. The strong demand for loyalty programs will likely power PCOM stock higher.

And while the major client base for Points International Ltd. is comprised of airlines, there are a host of opportunities in other service industry segments, such as banking and retail.