Financial technology innovators with upside.
Technology stocks have received premium valuations throughout the pandemic. But now, given the threat of rising interest rates and higher inflation, investors may not be willing to pay the same premium for these businesses. That’s why higher-growth names have been selling off in the information technology sector recently. Despite this, investors with a long-term approach may choose to bet on the transformation that financial technology, or fintech, companies are bringing: the digitization of money, online payments, online bank and nonbank services, and easier access to credit. If you want to know how to get a piece of these disruptive initiatives, here are seven of the best fintech stocks to consider.
Block Inc. (ticker: SQ)
At a $65 billion market cap, Block is a major player in the digital payments space. Block, until recently known as Square, attracts a wide range of customers, from small operations to big corporations with more complex transactions. Block is also focused on global expansion, driving into new markets including the U.K., Australia, Canada and France. As contactless payments become more widespread in the era of COVID-19, Block is well positioned to remain a leader in this growing ecosystem of digital transactions. Block is also heavily exposed to cryptocurrency. A subsidiary of the company, Spiral, builds and funds Bitcoin projects. “Their recent company name change represents a shift in focus from a pure payments company to a broader, more diversified fintech innovator looking to expand their crypto presence,” says David Miller, portfolio manager at the new Strategy Shares Halt Climate Change ETF (NZRO).
PayPal Holdings Inc. (PYPL)
PayPal has a been at the vanguard of digital payments for more than two decades. Its platform has more than 400 million consumers and merchants in more than 200 markets globally. Logan Purk, senior research analyst at Edward Jones, describes PYPL as a pure-play bet on continued e-commerce growth. “It’s difficult to find another stock like that out there,” he says. In 2022, PayPal is launching Pay With Venmo on Amazon.com Inc.’s (AMZN) platform. This partnership comes as online purchasing activity has skyrocketed during the pandemic, with 47% of Venmo users expressing interest in paying with Venmo when checking out with merchants, according to Venmo’s 2020 Behavior Study. “It’s likely they will continue to deliver on their long-term growth algorithm, which is 20%-plus growth, which we think over time results in fairly attractive returns for shareholders,” Purk says. “PayPal continues to expand its services such as peer-to-peer payments, Venmo, crypto and buy-now, pay-later,” which is growing its global digital payment footprint.
Visa Inc. (V)
The consumer payments giant Visa is also a leader in digital payments, making it an excellent fit on the list of the best fintech stocks to buy. Visa expanded its reach to more than 80 million merchants, a 14% increase, in fiscal year 2021, according to the company’s 2021 shareholder letter. “We are bullish on Visa, which has a strong business with a wide moat that makes it difficult for competitors to match Visa’s prowess,” says David Trainer, CEO of New Constructs, a Nashville-based investment research firm. The credit card giant is also investing heavily to continue its growth in digital payments. Over the past five years, the company has invested more than $9 billion in technology to ensure that its users are confident spending digitally. Compared to other names in fintech, Trainer says, Visa’s stock valuation is much lower, with a forward price-to-earnings ratio of about 25. He also notes Visa’s high return on invested capital, or ROIC, a metric that shows a company’s return on all cash invested in the business. “A stock with a high ROIC is difficult to find in the fintech space,” Trainer says.
Intuit Inc. (INTU)
Intuit, the tax and accounting software company, is on the list of the best fintech stocks to buy for 2022 because of its established customer base and aggressive growth. The company’s revenue grew to $2 billion in its most recent quarter from $1.3 billion a year earlier, and it projects roughly $12 billion in sales for 2022, a 26% to 28% growth projection. The technology platform has a suite of services including TurboTax, QuickBooks, Mint, Credit Karma and Mailchimp. Purk says Intuit’s newer acquisitions, like Credit Karma and Mailchimp, have resulted in strong growth and a more complete platform for small and medium-size businesses. “That’s a compelling market they’re plugged into which should drive some fairly strong top-line growth over the next several years,” he says.
Upstart Holdings Inc. (UPST)
Upstart is an artificial intelligence lending platform that partners with banks to improve access to affordable credit. According to its latest earnings report, the company has more than tripled its revenue, profits, and the number of banks and credit unions on its platform since its initial public offering last year. In the third quarter of 2021, the company reported 250% revenue growth over the prior year. Upstart has been accelerating in its partnerships with auto dealerships as it seeks to grow its transaction volume. Even though the stock is far from its 2021 highs, UPST is still up more than 100% in the past year.
Robinhood Markets Inc. (HOOD)
Robinhood, the brokerage that shook up the landscape of retail investing, has more than 22 million funded accounts and more than 18 million monthly active users, earning it a spot on the list of the best fintech stocks to buy. Even though the brokerage has come under scrutiny over its payment-for-order-flow model, there are many things to look forward to from Robinhood, such as retirement account offerings, expanding access to cryptocurrency, live customer support, a recurring investing option and a feature allowing investors to transfer their outside accounts. These initiatives may improve retail investor participation in the stock market and continue to grow Robinhood’s user base.
Amazon.com Inc. (AMZN)
Amazon is far from a pure-play fintech stock, but it earns a spot on this list because it has been partnering up with large players in this space. Amazon is the largest e-commerce player in the world, where customers have grown comfortable with digital and cashless transactions. AMZN announced a partnership with Affirm Holdings Inc. (AFRM) to gain a footing in the buy-now, pay-later market. This payment option will offer more flexibility to customers who qualify. This marked the e-commerce giant’s first partnership with an installment program and is a signal that this payment option will continue to flourish. Amazon is partnering with other fintech stocks, including Block and Intuit, who are building out their own buy-now, pay-later business models.
7 fintech stocks to buy for 2022:
— Block Inc. (SQ)
— PayPal Holdings Inc. (PYPL)
— Visa Inc. (V)
— Intuit Inc. (INTU)
— Upstart Holdings Inc. (UPST)
— Robinhood Platforms Inc. (HOOD)
— Amazon.com Inc. (AMZN)
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7 of the Best Fintech Stocks to Buy for 2022 originally appeared on usnews.com
