2024/01/17 Penta Ten-Dimensioanl Score
Project Name: Pendle Finance
Token Ticker: PENDLE
Current Price: $1.98
6M Target Price: $3.9
Upside: 97%
Penta Score: 80
Data as of: January 17, 2024
Research Summary:
Focus on LSDFi Sector, with a broad market scope. Pendle is an interest rate derivatives protocol established across multiple chains, performing 'coupon stripping' on interest-bearing token assets. This process separates the interest payment and principal payment parts into independently tradable tokens. Pendle applies interest rate derivative structures onto the cryptocurrency realm, enabling users to execute yield management by trading these separated tokens.
Dominate the Yield Tokenization segment. Pendle was the fastest growing platform in the LSDFi track in terms of Total Value Locked (TVL) in 2023. Furthermore, Pendle is the dominant player in coupon stripping segment. Self-developed ERC-5115 protocol offers better scalability compared to competitors adopting ERC-4626. Having undergone stringent code audits by Ackee Blockchain and Dedaub, its risk management capability is currently relatively strong within the same track.
TVL doubled in less than six months fuelled by Binance launch and Real World Asset (RWA) deployment. The launch of PENDLE token on Binance in early July 2023 brought a surge of popularity and a sharp increase in active users. The launch of RWA related products on August 24 led to another peak in traffic, which pushed the user to around 6,000 level. From August 12, 2023, to January 17, 2024, Pendle doubled its TVL from $140mn to $290mn over a five-month period.
New launches of eETH and LRTfi are expected to bring another $200mn TVL in next six months. On January 16 2024, Pendle collaborated with EtherFi to launch the Liquid Staking Token (LST) eETH, officially entering the re-staking/LRTfi sector. By purchasing PT, users can earn up to 24% fixed ETH returns. By depositing eETH in the Pendle, LP will also be granted with all native rewards, including EigenLayer points and EtherFi loyalty points.
Valuation and Target Price: We expect TVL from USDC to grow 40% MoM to $127mn in six months and TVL from cDAI to hit $113mn in six months, thus driving total TVL to grow to $669mn in six months. Further we apply 1yr average fully diluted market cap/TVL ratio of 1.59 and estimated total supply of 274mn tokens in six months to derive our 6M target price of $3.9, which implies 97% upside.
Key Risks: token circulation surge, market competition, technical security, and lack of user education.
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