Why Xoom's 'Competitive Pressure' Makes It A Sell

In a report published Wednesday, Compass Point analysts maintained a Sell rating on

, while raising the price target from $10 to $11. Xoom reported better-than-expected 1Q15 results, highlighted by mixed top-line trends but lower marketing expenses. The company has guided to 2Q15 revenues of $46-48M (+18 percent y/y at the midpoint), adjusted EBITDA of $4-$6M (flat), GAAP EPS of ($0.03)-$0.02, and adjusted EPS of $0.05-$0.10 (vs. consensus of $0.10). The company has also raised its revenue and earnings guidance for 2015. The company's active customers of 1.4 million were in-line with expectations, while transactions of 3.55 million were marginally ahead of Compass Point estimates. The company's gross sending volume (GSV) was, however, up "only 6% YOY versus our estimate of +21%, 4Q14 at +29%, and at least double digit growth during the previous 12 quarters. On a per transaction basis, XOOM's GSV fell 14% YOY to $471," the analysts mentioned. Xoom will continue to benefit from expansion into new markets but "we continue to expect pressure in the company's core markets to drive expenses higher and revenue growth lower," the analysts added. The adjusted EPS estimates for 2015 and 2016 have been raised from $0.35 to $0.38 and from $0.50 to $0.55, respectively. Xoom's stock is likely to continue to command a premium to peers, although "the gap should tighten as revenue growth decelerates and the company's competitive advantage begins to come under pressure," the report added.