Remitly Global rose sharply Tuesday after the U.S. Senate relaxed taxes on international money transfers. But the move didn't help other remittance stocks that are lagging badly.
In a massive spending bill that includes nuclear-energy tax breaks and a phaseout of clean-energy credits, the U.S. Senate added exceptions to a tax aimed mostly at immigrants.
Just like in the House version, the Senate bill includes a 3.5% tax on remittances abroad. But the Senate version eliminates the tax on remittances funded from certain U.S. accounts or with U.S.-issued debit or credit cards, The Wall Street Journal reported.
A William Blair analyst said in a note to clients that the restrictions proposed by Senate Republicans are lighter than initially feared, TheFly.com reported. The Senate bill is significant for Remitly, because as a digital provider, Remitly senders must have a bank account.
Mexico-based La Jornada newspaper reported that Sen. Eric Schmitt (R-Mo.) had proposed raising the remittance tax from 3.5% to 5%.
While the Senate's draft offers some relief to immigrants who send money to families in their home countries, many are still stuck with the tax. The exception on the 3.5% tax applies only to senders who are U.S. citizen or nationals, American Banker and other news organizations reported. It puts the burden on payment companies and banks to verify whether the sender is an American citizen.
The U.S. is consistently the top source of international remittances. In 2022, remittances from the U.S. topped $79 billion, according to the United Nation's World Migration Report. The 2024 Annual Remittance Adoption Report from Visa defines remittances as human-to-human transactions, often "from migrant workers who send funds to their loved ones in their native countries. Remittances act as a lifeline for many families in countries on every continent."
Remitly Stock Finds Support
Remitly Global stock, which was in the IBD 50 as recently as last month, climbed as much as 13% in heavy trading. But it pared gains to 7% in afternoon action. The stock found support after pulling back to the 200-day moving average.
Shares are now trying to climb back above the 50-day moving average. A decisive move above the line could provide an early entry while the stock tries to form a base.
Remitly stock has a 21-day average true range ratio (ATR) of 3.02%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.
With the S&P 500 and Nasdaq now in a power trend, investors can buy stocks with ATRs up to 8%, though they should be wary of being too concentrated in high-octane names.
Remitly has an IBD Composite Rating of 78, below the 90 usually seen in market leaders.
Other Remittance Stocks Flat
Other stocks that offer money transfers were little changed and some remained in long downtrends.
International Money Express was little changed and still trading near a five-year low. The stock is down 50% year to date and has a 32 Composite Rating.
Western Union also was nearly flat Tuesday after falling to an all-time low on Monday. Shares are down 19% this year. The Composite Rating is 30.
PayPal, which operates PayPal Xoom transfers, was down 1.4% in afternoon trading and remained below its 200-day line. PayPal has an 80 Composite Rating. Shares are down 16% year to date.
