How does Raiz (ASX:RZI) stack up against its old friend Acorns?

It's like comparing apples, oranges and Acorns, when it comes to these investing apps.

| More on:
woman looking at iPhone whilst working on a laptop

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The latest news of US-based Acorns planning to go public through a SPAC merger has shone a light on its old Aussie friend, Raiz Invest Ltd (ASX: RZI). At the time of writing, the Raiz share price is trading slightly higher at $1.325, up 0.4%.

For the early investors and users of the micro-investing app, you would recall Raiz being known as Acorns. In January 2018, the Australian business ceased its joint venture with Acorns Grow Inc and rebranded to Raiz.

Raiz swiftly listed on the ASX five months later.

Now that Acorns plans to go public, we get to compare the two investing apps that stemmed from the same roots.

How the companies differ

Acorns and Raiz are similar in what they offer to customers – mobile-first micro-investing with a round-up feature which uses your spare change from purchases to invest.

Where the companies differ substantially is how they make money. Acorns derives majority of its revenue through a tiered subscription model, ranging from $1 to $5 per month.

Raiz uses a fee model tied to the account balance. In a way, this recurring monthly fee is like Acorns' subscription model.

In theory, Raiz's model should allow it to capture more revenue from its customer than Acorns as the account value grows to a monthly fee exceeding $5.

Another point of difference between Acorns and Raiz is size. Raiz was relegated to the Asia-Pacific region as part of an agreement with Acorns when their joint venture ended. A consequence is that Acorns holds a much larger market in the United States.

The by-product is Acorns boasts 4 million subscribers, while Raiz is hovering around 430,000 active customers. This user-base discrepancy translates to the companies' funds under management (FUM) and revenue.

Acorns touted $4.74 billion in FUM at the end of April. Meanwhile, Raiz reported its FUM to be $737.56 million. Acorns' revenue for the year ending 31 December 2020 came in at $71 million, while Raiz recorded $11.155 million.

How does ASX-listed Raiz compare?

The Raiz share price has remained mute today, finishing flat at $1.32. It seems the market was unfazed by the valuation attributed to Acorns.

Interestingly, while Acorns possesses a user base roughly 9.3 times larger than that of Raiz, and revenue that is approximately 6.4 times greater, the valuation doesn't adhere to an equivalent ratio.

According to the slide deck, the SPAC merger with Pioneer Merger Corp has a pro forma equity valuation of US$2.151 billion. This is 25 times greater than the A$108.2 million market capitalisation of Raiz, based on its current share price.

There are many factors at play when it comes to a company's valuation. This doesn't necessarily mean the Raiz share price is trading at a discount. However, shareholders might find it interesting.

Should you invest $1,000 in Raiz Invest Limited right now?

Before you buy Raiz Invest Limited shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Raiz Invest Limited wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 7 February 2025

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Financial Shares

A woman holds up her hand in a stop gesture with a suspicious look on her face as a man sitting across from her at a cafe table offers her flowers.
Financial Shares

No Deal: Perpetual shares slide as KKR offer terminated

Perpetual now has quite the task ahead of itself.

Read more »

A man points at a paper as he holds an alarm clock.
Financial Shares

It's time to buy: 1 ASX 200 stock that hasn't been this cheap in years

This business could be too cheap to ignore.

Read more »

A businessman carrying a briefcase looks at a square peg or block sinking into a round hole.
Earnings Results

Block share price tanks 8% on FY24 results

Investors didn't wait to react to the company's 2024 numbers.

Read more »

Delighted adult man, working on a company slogan, on his laptop.
Earnings Results

QBE share price lifts off on 31% final dividend boost

ASX 200 investors are piling into QBE shares on Friday. Is this why?

Read more »

Man sitting at desk in front of PC with his head in hands after looking atA worried man holds his head and look at his computer as the Megaport share price crashes today
Earnings Results

Why did the Magellan share price just crash 13%?

ASX 200 investors are sending the Magellan share price tumbling today. But why?

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Earnings Results

Guess which ASX 200 financial stock just boosted its dividend by 25%

Up 76% in a year, this ASX 200 financial stock just upped its dividend payout too.

Read more »

Woman and man calculating a dividend yield.
Dividend Investing

Here's why IAG shares are in the red on Tuesday

Why is this ASX insurance juggernaut in the red?

Read more »

Excited couple celebrating success while looking at smartphone.
Earnings Results

2 ASX 200 financial shares going gangbusters on earnings updates

These shares are surging after impressing with their strong half year results.

Read more »