Remitly's Valuation Dislocation and the Case for a Contrarian Buy

In a market increasingly skeptical of high-growth fintechs, Remitly Global (RELY) stands out as a compelling contrarian opportunity. Despite a slowing macroeconomic environment, the company's robust financial performance, strategic innovation, and undervalued metrics suggest a significant re-rating is not only possible but increasingly probable.

A Strong Foundation Amid Slowing Growth

Remitly's Q3 2025 results underscore its resilience. Revenue surged 24.7% year-over-year to $419.5 million, surpassing analyst expectations, according to a IndexBox analysis, while adjusted EBITDA hit $61.18 million, reflecting a 14.6% margin, per the same IndexBox analysis. The company's active customer base now stands at 8.9 million, up 1.59 million from the prior year, according to the IndexBox analysis. These figures highlight Remitly's ability to scale profitably even as global remittance growth moderates.

However, the company faces headwinds. Free cash flow margin contracted sharply to 0.4% in Q3, down from 6.9% in the previous quarter, according to the IndexBox analysis, raising questions about sustainability. Yet, this dip appears temporary, driven by strategic investments in high-value senders and product innovation like Flex, which has boosted send volume for transactions over $1,000, as noted in a Futunn earnings call summary. With the federal remittance tax exemption for digital transactions set to take effect in 2026, as discussed in the Futunn earnings call summary, Remitly is well-positioned to capitalize on structural tailwinds.

Valuation Dislocation: A Mispriced Opportunity

Remitly's forward P/E ratio of 12, based on 2026 adjusted EPS estimates, appears modest compared to broader fintech benchmarks, according to a Yahoo Finance article. While Western Union (WU) trades at a P/E of 3–5, and MoneyGram (MGI) historically commanded a P/E of 31.4, Remitly's valuation sits in a gray area. This dislocation reflects market skepticism about its ability to maintain hypergrowth, yet it overlooks the company's superior EBITDA margins and faster revenue expansion.

The disconnect is even starker when comparing Remitly to non-remittance peers. For instance, Euronet Worldwide (EEFT) trades at a P/E of 12.8, while Global Payments (GPN) commands 13.0, according to Yahoo Finance. Remitly's forward P/E of 12 suggests it is priced more conservatively than these cash-generative fintechs, despite outperforming them in revenue growth and margin discipline.

Analyst Sentiment and Catalysts for Re-Rating

Market sentiment is cautiously optimistic. JP Morgan recently reaffirmed an "Overweight" rating for Remitly, with an average one-year price target of $25.69-implying a 108.71% upside from its $12.31 closing price, according to a Nasdaq article. Analysts highlight the company's strategic focus on high-value senders and its Flex product as key differentiators. The put/call ratio of 0.34 further signals bullish positioning, according to the Nasdaq article, suggesting retail and institutional investors are betting on a rebound.

Critical catalysts include the 2026 tax exemption, which could reduce transaction costs and drive volume, and the company's ability to maintain its 37.2% three-year CAGR, as discussed in the Futunn earnings call summary. Even in a slowing growth environment, Remitly's EBITDA guidance for 2025 ($235 million) exceeds analyst expectations, according to the IndexBox analysis, demonstrating its capacity to deliver consistent profitability.

Risks and Institutional Skepticism

The case is not without risks. Free cash flow volatility and reduced institutional ownership-Naspers cut its stake by 46.77%, while Baillie Gifford reduced its position by 70.56%, according to the Nasdaq article-signal caution. However, these moves may reflect short-term portfolio rebalancing rather than a fundamental reassessment of Remitly's long-term prospects.

Conclusion: A Contrarian Buy in the Making

Remitly's valuation dislocation offers a rare entry point for investors willing to look beyond near-term headwinds. With a strong balance sheet, innovative product suite, and structural tailwinds on the horizon, the company is poised to outperform in a sector where many peers are struggling to adapt. For those who can stomach the volatility, Remitly represents a compelling case for a re-rating in a slowing growth environment.