Pagaya Technologies (PGY) is back in focus after closing a US$600 million upsized auto asset backed securitization, appointing Terry O’Neil as Chief Commercial Officer, and pursuing an intellectual property lawsuit against Klarna.

These updates have landed alongside sharp short term share price momentum, with 1-day, 7-day and 90-day share price returns of 8.31%, 18.50% and 35.12% respectively. Year to date share price performance is down 32.14% and the 5-year total shareholder return is down 87.06%, suggesting sentiment has recently improved but long term investors still sit on large losses.

If Pagaya’s AI driven lending platform has caught your eye, it may be worth seeing what else is moving in this space by checking out 47 AI infrastructure stocks

With Pagaya now profitable on US$1.3b in revenue, recent share price gains, and a value score of 5, the key question is whether the stock still trades at a discount or if markets are already pricing in future growth.

Most Popular Narrative: 55.6% Undervalued

Pagaya’s most followed narrative places fair value at $34.05 per share compared to the last close of $15.12, implying a large valuation gap in favor of the bulls according to yyzjons.

Pagaya is well-positioned to benefit from a few key products and services that could significantly drive its sales or earnings in the future:

AI-Driven Underwriting Platform

Core Product: Pagaya’s AI-powered platform for financial underwriting and risk assessment is a key driver of revenue. As financial institutions increasingly adopt AI solutions for more accurate and efficient decision-making, Pagaya’s platform could become integral to their operations, leading to higher adoption rates and increased revenue.

Impact on Earnings: Continued refinement and expansion of its AI technology, particularly for loan origination, credit scoring, and asset-backed securities, could lead to higher volume of transactions, improved margins, and stronger partnership growth.

Curious what earnings power and revenue mix could justify that kind of upside, and how margins and growth are modeled to get there? The narrative spells out a detailed path of scaling volumes, expanding product lines, and improving profitability that underpins the $34.05 fair value call.

Result: Fair Value of $34.05 (UNDERVALUED)

However, this bullish path could be knocked off course if AI adoption in lending stalls, or if tighter credit conditions hit Pagaya’s loan and ABS volumes.

Next Steps

With sentiment clearly split between upside potential and real concerns, this is a moment to move quickly and test the story against the numbers yourself, starting with 4 key rewards and 1 important warning sign.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.