Why Chime Stock Dropped 24% in September

Key Points

• Chime is a hot IPO stock, and its price soared on hype before coming back down.

• It has a differentiated banking platform with strong opportunities.

• Today, it trades at a more reasonable valuation.

• 10 stocks we like better than Chime Financial ›

Shares of Chime Financial (NASDAQ: CHYM) stock fell 24% in September, according to data provided by S&P Global Market Intelligence.

It's still coming off its fresh initial public offering (IPO) that brought its valuation to soaring levels, and the natural progress in these cases is often that the stock drops from hyped-up levels before it settles at a more balanced price.

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A different kind of digital bank

Chime is an online bank that offers entry-level services for lower-income customers. Unlike many of today's aggressive neobanks, Chime has a limited assortment of services and isn't itself a bank. It partners with other banks that give it a cut for bringing in business, and it also makes money from swipe fees from its Visa-branded credit card.

It has many of the features that growth investors love in a new stock. Revenue increased 37% year over year in the 2025 second quarter, the first quarter it reported as a public company, with 113% growth in platform revenue. Customers increased 23%, and average revenue per active member was up 12%. That implies deepening engagement and cross-selling success. Chime has only 8.7 million members, giving it a long growth runway. As these members enjoy the platform's ease of use and fee-free accounts, it's likely to become popular with more members looking for this kind of experience.

It demonstrated an impressive gross margin of 87% in the quarter, but net loss widened to $923 million. Much of that was due to IPO-related stock-based compensation, which is typical for a newly public stock. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was $16 million, and the low-cost platform is likely to lead to net profitability as the company scales.

Chime is already rolling out new products that appeal to its base and create more cross-selling opportunities, including the membership program Chime+. Management is guiding for revenue to increase 28% to 29% for the full year and for adjusted EBITDA to be $84 million to $94 million.

A more attractive entry price

Chime went public in June at the price of $27 per share, and it closed the first day of trading at $43. However, it's deflated since then to $21 per share as of this writing.

At the current price, Chime stock trades at a more reasonable valuation of 4 times trailing 12-month sales. That's attractive for a growth stock. Chime looks like it has a long and strong future ahead, and it has robust opportunities in attracting new members and launching new products and services.

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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Visa. The Motley Fool has a disclosure policy.