Pineapple Financial Inc. (NYSE: PAPL ) received a positive outlook from EF Hutton on Wednesday, which initiated a Buy rating with a $5.50 price target. The cloud-based fintech company recently expanded into insurance and now offers a range of products, including mortgage insurance (which is required for all Canadian mortgages) as well as whole life insurance, permanent life insurance, credit insurance and critical illness insurance. Consumer and business customers.
The analyst highlighted Pineapple Financial’s strategic move into non-mortgage insurance products, noting that these products have higher commission rates compared to mortgage insurance, so profitability has the potential to increase. This shift is expected to contribute positively to the company’s financial health, as non-mortgage insurance commissions are reportedly more than twice as high as mortgage insurance commissions.
EF Hutton’s analysis pointed out that the net profit margin of Pineapple Financial’s insurance products is significantly higher than that of mortgage loan services, at 50% and 18% respectively. This was attributed to the company’s decision to build an in-house sales team to generate leads, thereby reducing the need to pay higher customer acquisition commissions to outside insurance advisors.
The company’s strategy of leveraging its fixed cost base while expanding its product offerings is seen as a key factor in its ability to improve net profit margins. By leveraging existing resources, Pineapple Financial aims to maximize the efficiency of its sales process and reduce overall costs associated with customer outreach and service delivery.
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