WLTH: Incentives drive cross-asset adoption, while Home Lending ramps

Research evidence excerpt

WLTH: Incentives drive cross-asset adoption, while Home Lending ramps

drive total ending platform assets above RBC/Street 2027 90.5A 94.0E 96.9E 104.3E

estimates; 2) the company’s cross-product adoption incentive is showing Prev. 93.0E 97.7E 103.1E 111.4E 2028 106.3E 108.2E 112.3E 123.2E

traction with over 4K new account openings and resulted in an asset Prev. 106.4E 116.0E 125.2E 152.4E

weighted cross-product adoption rate of ~63% as of May (+1.5ppts vs prior EBITDA, Adj

to incentive), with adopters having notably larger deposits than avg users; 2026 38.0A 44.7A 43.8A 44.2A

3) management launched its Home Lending product in Colorado and Texas 2027 37.5A 37.7E 39.8E 43.4E Prev. 40.7E 43.0E 48.6E 51.4E

in the quarter; and 4) management highlighted that the leading LLMs are 2028 46.2E 46.7E 48.0E 52.0E

recommending Wealthfront to users and driving elevated traffic to the Prev. 53.4E 53.1E 53.2E

platform. All values in USD unless otherwise noted.

Priced as of prior trading day's market close, EST (unless otherwise noted).

Where the pushback is. 1) Cash Management fees declined to 58bps vs

61bps a year ago, due to incentives; 2) Cash Management assets declined

(~1%) m/m, due to seasonality related to tax payments, but saw net

deposits of $104M in May; and 3) adj. EBITDA margins contracted ~350bps,

due to the incentives and rollout of Home Lending, which was expected.

Adjusting estimates and price target. Given the results and management

commentary, we are adjusting our FY27 and FY28 revenue, adj. EBITDA,

and adj. EPS estimates to $386M/$158M/$0.67 and $450M/$193M/$0.79

from $405M/$185M/$0.72 and $500M/$211M/$0.82. Due to the estimate

reduction and more challenging comp group, we are reducing our price

target to $13 from $14, or 19x P/E and 11x EV/EBITDA on our CY26