While hard times have created opportunities for FirstCash (FCFS) in the past, this pandemic has so far been one of those “it’s different this time” events for this leading pawn shop operator. While store closures have been manageable in most operating areas, government support/stimulus and foreign remittances have led to a steeper decline in pawn demand, and adverse foreign currency moves haven’t helped either.
These shares have lost a little more ground since my last update, and the cash flow outlook for the next few years is going to be altered by FirstCash rebuilding its pawn loan balances. I’m still bullish on the long-term opportunity, though, as FirstCash remains a very viable option for customers with poor access to better financing options, particularly in Latin America, and I expect adjusted free cash flow growth in the high single-digits to support the share price as the business starts to normalize toward the end of 2020.
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