Amigo Holdings Share Price Forecast September 2021 – Time to Buy AMGO Stock?

Shares of guarantor loans/subprime lender Amigo Holdings (LSE: AMGO) are in the green right now, currently trading around the 13p range. The year has been a challenging one for the company as it suffered a crash after May. However, AMGO shares have started to rise again since the start of September. Are these signs of a comeback or is it just a temporary spike? That is what almost every investor is asking. The company experienced immense success in 2019, trading at 292p at one point. However, they have fallen more than 95% as it steadily declined over the next year.

Amigo Holdings – Technical Analysis

According to the financial statement from Amigo Holdings, the company has earned a revenue of £170.80 million with a profit margin of -169.26% compared to £294.20 million in 2019.  The current market cap stands at £62.459 million with total assets worth £510.1 million.

Moving averages for Exponential Moving Average (100)(10.37), Simple Moving Average (100)(11.65),  Exponential Moving Average (200)(12.95), and  Simple Moving Average (200)(11.05) are indicating a buy action. On the other hand, oscillators such as Stochastic RSI Fast (3, 3, 14, 14)(100.00),  Williams Percent Range (14)(−21.18), Bull Bear Power(6.00) and Ultimate Oscillator (7, 14, 28)(53.53) are all neutral.

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Recent Developments

Amigo Holdings is a guarantor lender where it allows customers to borrow small amounts of money for a short period of time at a high interest rate. The company released a string of unimpressive earnings reports which indicated a continually rising level of impairment on its loans. To remedy this, the company put pressure on guarantors to pick up the tabs. As a result, there were major complaints against the organisation to the Financial Conduct Authority, which subsequently began its investigation.

The management team of Amigo Holdings filed for a Scheme of Arrangement to repay its creditors as well as to satisfy the complaints made against the firm. This is often a last-ditch effort made by companies allowing them to restructure their balance sheet and save it from insolvency. The shares were also suspended from trading when the court hearing took place.

However, things are looking better for Amigo Holdings recently as the company reported its first-quarter results for the year. Encouraging signs from this result included the suspension of additional lending, causing the revenues to suffer by 33%. However, more customers are paying their bills as indicated from their impairment ratio which has been decreased from 37.9% to 23.4%. The lender also noted a £15 million rise in profits before tax this quarter as no new complaints have been filed against it in the last three months.

Should You Buy AMGO Shares?

The recent rise in AMGO share prices has been mainly caused by the positive report mentioned above. However, this does not give enough reasons for investors to jump in as the company has piles of debt to repay. The company’s profit margin will take a sudden hit when the suspension of interest payments which the company negotiated last year, comes to an end later in September. The new board does have confidence, evidenced by several members acquiring shares of the company throughout 2020.

However, considering all of the above factors, Amigo shares are back on track. As the company tries to claw itself back to a good financial position, investors may expect significant volatility. Because of this exact reason, it’s not the right time to add AMGO shares to one’s portfolio.

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