Strong Growth, Improving Earnings Make Chime Stock A Buy?

June 18th, 2025 by Trefis Team
CHYM: Chime Financial logo
CHYM
Chime Financial

Fintech company Chime Financial (NASDAQ: CHYM) debuted on the markets last week. While the stock surged nearly 40% above its IPO price of $27 to open at $43, prices have since settled lower, with the stock trading just below $35 currently. While the post-IPO volatility isn’t unusual, what’s the investment outlook like for Chime?

Image by Gerd Altmann from Pixabay

What Chime Does

Chime is a neobank, essentially a digital-first banking company that operates without physical branches. Chime focuses on offering low-cost financial services via sleek, mobile-first interfaces. That approach has resonated with younger users and underserved segments of the population, particularly those who are put off by traditional banks’ high fees and requirements. Chime offers a no-fee structure, early direct deposit access, and a simplified app experience, differentiating it from many traditional banks. The company’s popular services include “MyPay,” which lets customers access as much as $500 of their paycheck in advance, while the “SpotMe” offering provides fee-free overdraft services. Chime says that it caters to a largely underserved demographic, with the company estimating that it currently reaches under 5% of the roughly 200 million Americans who earn under $100,000 a year. That gives it a considerable runway for growth. Fintech company Circle, which deals in stablecoins, also went public recently. Can Circle Stock Top $300?

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A Simple Business Model

Chime also has a relatively simple business model. It generates most of its revenue via interchange fees, which are the small fees merchants pay whenever a customer swipes their Chime credit or debit card. Moreover, unlike some peers such as SoFi, Chime is not a bank itself. Instead, it partners with established banks to handle the back-end banking services. This means that the company holds little to no credit risk, which is valuable given that it caters to less affluent customers. This model also enables Chime to earn higher interchange fees compared to traditional banks, which are capped by regulation. Chime’s financials have also been picking up. Revenue grew by over 30% in 2024 and surged by 32% in Q1 2025. The company’s profit trajectory is also improving. While net losses stood at $25 million last year, they narrowed compared to 2023. Chime was actually profitable in the first quarter of 2025. The turnaround indicates that the sizable marketing investments that Chime has been making in marketing and brand building are paying off. For perspective, Chime spent over $500 million in 2024 alone for marketing.

Challenges

That said, there are challenges, too. The neo banking space is increasingly commoditized, with minimal differentiation between digital offerings. While Chime has gained brand recognition via aggressive marketing and an early-mover edge, earning customer loyalty in banking is tough, and keeping it isn’t easy either. Traditional banks are also increasingly developing comprehensive digital platforms that bundle multiple financial services and ease overall friction in the banking process. Many consumers, especially older or more affluent ones, will remain reluctant to move away from established players such as JPMorgan Chase or Wells Fargo.

Valuation-wise, Chime’s current price around $34.50 implies a market cap of about $12 billion, meaning that it trades at about 7x trailing revenues – which is not exactly cheap. That said, the company’s improving profitability and strong growth should justify this to some extent. Chime’s reliance on transaction fees also poses a risk, as any economic slowdown could lead to lower spending activity. Unlike traditional banks that benefit from more stable revenue streams like deposits or wealth management fees, Chime remains heavily dependent on user growth and transaction volume.

Investing in a single stock like CHYM can be risky. On the other hand, the Trefis High Quality (HQ) Portfolio, which includes 30 stocks, has consistently outperformed the S&P 500 comfortably over the last four years. What’s the reason for that? As a whole, HQ Portfolio stocks have yielded higher returns with lower risk compared to the benchmark index, providing a less turbulent experience, as evidenced by HQ Portfolio performance metrics.

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