How are margins and profitability trending given the revenue mix between recurring and non‑recurring streams?

Fundamentals & Margin Outlook

Nayax’s Q2 2025 top line of $95.6 M is modest in absolute terms, but the 32 % jump in recurring revenue signals a decisive shift toward higher‑margin, subscription‑type earnings. Recurring streams typically carry gross margins of 70‑80 % for SaaS‑enabled payment solutions, versus the 30‑40 % margins that dominate its hardware‑sales and one‑off services. Assuming the company’s cost structure stays constant, the 32 % boost in the high‑margin component should lift overall gross margin by roughly 4–6 percentage points versus the prior year, pushing the combined gross margin into the low‑70s. Operating leverage further improves profitability: the recurring base is largely fixed‑cost, so each incremental recurring dollar translates into higher operating income and EBITDA margin expansion, likely moving the EBITDA margin from ~15 % last year to the high‑teens or low‑20s this quarter.

Market Dynamics & Trade Idea

The market has priced the earnings beat modestly (sentiment +70), but the revenue mix shift is not fully reflected in the price. The stock is trading near its 200‑day moving average with a bullish ascending‑triangle pattern; volume on the recent rally has been above the 20‑day average, indicating institutional accumulation. With the recurring‑revenue tailwind expected to sustain a 20‑30 % YoY CAGR, the consensus earnings outlook for FY‑2025 is now upgraded by ~5 % in analyst forecasts, tightening the forward P/E to ~30× FY‑2025E earnings versus 38× a year ago.

Actionable Insight

- Long position: Enter a modest long (e.g., 5‑10 % of portfolio) on a pull‑back to the 20‑day EMA (≈ $12.30) with a 2‑month horizon. Target upside of 12‑15 % as the market re‑prices higher margins.

- Risk management: Place a stop‑loss just below the 50‑day SMA (~$11.70) to guard against a potential earnings‑quality pullback or macro‑risk (elevated rates, fintech competition).

- Watch: Upcoming guidance on recurring‑revenue run‑rate and gross‑margin guidance at the Q3 call; any downgrade will likely trigger a 5‑10 % retrace.