Blend Labs’ (BLND) Stock

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Contributor, Benzinga
September 3, 2021
$2.80
-0.12[-4.11%]
Last update: 9:07AM (Delayed 15-Minutes)
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Open2.800Close2.830
Vol / Avg.1.153M / 1.776MMkt Cap705.734M
Day Range2.750 - 2.93052 Wk Range0.529 - 3.405

Perhaps one of the greatest ironies in modern society is that the underpinning of the language of business — government-backed currency — is often tethered to a curiously archaic system. For example, several institutional-related activities, such as wire transfers or the closing of real estate deals, usually involve high-effort manual processes.

Fortunately, Blend Labs, a cloud-based platform that provides end-to-end consumer services for all banking products, aims to permanently change that narrative. Helping enterprise-level clients process billions of dollars’ worth of transactions daily, Blend Labs’ initial public offering (IPO) carries both relevance and significant investor intrigue.

Blend Labs’ Financial History

One of the most anticipated IPOs this month, Blend Labs has the right stuff to back up the hype. On average, the company processes over $5 billion in transactions every day. Further, Blend enjoys serious clout with the broader financial services industry, gaining 291 customers so far. These clients include powerhouse names such as Wells Fargo, Navy Federal Credit Union and SWBC Mortgage.

Further, the COVID-19 pandemic completely changed the game when it comes to transactional services, particularly in the home mortgage segment. A combination of home purchases sight unseen — due in large part to health concerns — and an extremely competitive market skyrocketed demand for quick and efficient digital services. Therefore, Blend Labs is one of the surprising beneficiaries of an otherwise terrible period.

In 2020, the fintech provider generated revenue of $96 million, nearly doubling its prior year sales tally of $50.7 million. Just as encouragingly, operating expenses totaled $137 million, only a 21% increase from 2019’s expense count of nearly $113 million. Furthermore, the positive growth trajectory has carried over into this year, with first quarter sales of $31.9 million representing a year-over-year increase of 104%.

But before you dive into this IPO, you should be aware that Blend Labs isn’t yet profitable. Last year, its net loss amounted to $74.6 million. To be fair, this tally somewhat pared 2019’s net loss of $81.45 million. Also, in Q1 2021, net loss came out to $27 million, a conspicuous widening of negativity from the nearly $23 million in the red Blend posted for Q1 2020.

Ultimately, though, you should keep in mind that Blend Labs is in its growth phase, where companies often eschew profitability for market share. Management made some key acquisitions to bolster its offerings, including buying out property title and insurance settlement services provider Title365.

Blend Labs’ Potential

The COVID-19 pandemic that temporarily upended the world last year wasn’t just a health crisis; it was also an awakening. Most conspicuously, the impact of the coronavirus exposed gross inequities in society. However, it also served to highlight the inadequacies of digital transactional infrastructures, sparking huge interest in online service platforms.

According to a McKinsey & Company report, “Ongoing shifts toward e-commerce, digital payments (including contactless), instant payments and cash displacement have all been significantly boosted” throughout the lockdowns and disruptions of 2020. Indeed, during the Q2 last year, e-commerce transactions represented nearly 16% of total retail sales, a dramatic increase of 10.5% from Q2 2019. With consumer expectations shifting significantly toward digitalization, enterprises across all industries must adapt or fade into irrelevance.

The beauty of BLND stock is that it’s an investment into a force multiplier. That is, Blend Labs upgrades enterprise-level clients to better serve customers through mortgage programs or consumer banking services. Further, Blend delivers cost efficiencies which in turn spark loyalty. For instance, during Q1 2021, existing customers represented 98% of that quarter’s year-over-year increase, a notable improvement of 83% of full year 2020 revenue growth being attributed to existing customers.

Although filled with potential, investors should be warned that the housing market presents risks for BLND stock. Because of the unprecedented demand increase in 2020 and the year to date, Blend may experience softness in the mortgage business. However, the objective for management is to offset this possible headwind through increased market share and per-client revenue.

How to Buy Blend Labs’ IPO (BLND) Stock

Much of the allure behind an IPO is the opportunity for investors to accrue substantial profitability. Because the ultimate performance of the underlying stock is unknown, it could either be the next big thing or a complete dud.

Adding to the volatility is the IPO process. Institutional investors and other high-net-worth entities are often first in line to buy new offerings at a rate discounted to what they might fetch in the public market. Retail buyers find themselves left out in the cold and must buy shares at the open.

However, the average investor has the advantage of discretion, choosing which issues to participate in without undue pressure. Also, if you already know how to buy stocks, this route is straightforward. If you don’t, just follow the simple steps below.

Step 1: Pick a brokerage.

Before you can buy shares, you must first pick a brokerage, which is an intermediary between you and a securities exchange, such as the NYSE or Nasdaq. Such exchanges are also called secondary markets and are platforms that facilitate transactions of already existing securities.

On the other hand, an IPO is an example of a primary market transaction. Primary markets facilitate the first transaction of newly created stocks (for example, an IPO underwriter selling shares to institutional investors).

As a retail buyer, you make transactions in the secondary market, necessitating a wise decision regarding intermediaries. Below is a list of best brokers to consider.

Step 2: Decide how many shares you want.

For any transaction, the share count is important because it determines your risk-reward profile. But for IPOs, this metric is even more critical because there’s always a chance that new shares can fly for several sessions. Of course, the opposite is also true. Therefore, choose a balanced number that you’ll be comfortable with.

Step 3: Choose your order type.

Prior to your first transaction, familiarize yourself with these market concepts:

  • Bid: The highest price a buyer will offer, the bid is always lower than the ask.
  • Ask: The lowest price a seller will accept, the ask is always higher than the bid.
  • Spread: Beyond the difference between the bid and ask price, the spread indicates market liquidity and risk. Narrower spreads indicate healthy demand due to buyers’ and sellers’ willingness to negotiate. Conversely, wider spreads indicate less demand and more risk.
  • Limit order: Essentially requests for orders to be filled at a specific price, limit orders provide transparency but no fulfillment guarantees.
  • Market order: A transaction request at the prevailing rate, a market order guarantees fulfillment but at the least favorable terms (i.e., buy orders on the ask).
  • Stop-loss order: You can protect your portfolio against volatility with a stop-loss order, which exits your position at either a predetermined price or the next available price.
  • Stop-limit order: A stop-limit order prevents an automated exiting of your position at an undesirable rate by only executing at a predetermined price.

Step 4: Execute your trade. 

To execute a market order, follow these steps:

  1. Select action type (Buy or Sell).
  2. Enter the shares you want to acquire (or Sell).
  3. Hit the Buy (or Sell) button.

Execute limit orders with the same sequence above, except that you also enter your desired execution price.

Financial Services for a Brave New World

Although the fintech industry had been implementing innovative platforms for years, the COVID-19 pandemic was the wake-up call that the financial industry needed to bring its infrastructure to contemporary standards. With Blend Labs’ cloud-based solutions, corporate clients can now seamlessly offer customers the convenience and efficiency of digitalized financial services.

About Joshua Enomoto

His distinct writing style of distilling convoluted data into relatable and compelling narratives has earned him recognition among several investment-related publications.