Fintech stocks are the cutting edge of the future. As countries such as Sweden and cities like San Francisco largely abandon cash-based transactions, there are more and more opportunities for digital service providers to pick up the slack. The fintech stock spectrum runs from the Silicon Valley upstarts trying to overturn the establishment to the other end, where large companies continue to grow by servicing their banking and insurance clients.
Today, we’ll look at 4 of these fintech stocks, including both disruptors and established players. While not all four of these stocks might be the right fit for all investors, they offer a strong level of diversification in a booming sector.
Let’s meet our first entry.
Fintech Stocks to Watch #1: Paypal
Paypal Holdings Inc (NASDAQ:PYPL) is many investors’ go-to name when it comes to fintech. And with good reason. Paypal has built a powerful brand and platform over the years, and it is starting to pay off in a major way for PYPL stock as of late.
Paypal has grown earnings 20%per year compounded over the past five years. Analysts don’t see it letting up; the analyst consensus is for continued 20%/year growth over the next five years. The stock is now trading under 30x forward earnings, which isn’t that expensive, given the growth rate.
Throughout 2015 and 2016, PYPL stock went nowhere. That was largely due to competition fears. But in 2017, Paypal stock took off, and understandably so. Management has cleverly built a platform that is largely neutral, thus allowing it to take on business from many sides. Collaborations with the likes of potential rivals such as Alphabet Inc (NASDAQ:GOOGL) have ensured Paypal’s safety and made it a compelling option for vendors that want to take on Amazon.com (NASDAQ:AMZN).
Is Paypal stock cheap here? Not exactly. 30x forward earnings seems like a fair price, and 7x sales is no bargain, but well under the 10x threshold for a fast-growing company. After spending most of 2018 consolidating, Paypal stock could rip to $100/share on a good earnings report.
Fintech Stocks to Watch #2: Fiserv
Fiserv, Inc. (NASDAQ:FISV) is the insiders’ fintech play. Most talk about fintech stocks inevitably leads to disruption. But for every outsider company that comes along and shakes things up, another dozen will fail. Sometimes it’s best to bet on the entrenched Goliath.
In this case, that giant is Fiserv. The company has quietly amassed a $31 billion market cap, and an incredible performance. FISV stock is up from $15/share in 2011 to $70/share now. And the run could have much farther to go. The company has delivered truly monstrous results. Earnings per share, for example, are up sevenfold over the past 15 years. Fiserv has incredible consistency, they’ve grown earnings 32 consecutive years, not stopping for any recession or financial crisis.
What’s making them so successful? Fiserv serves more than 12,000 banks, credit unions, hedge funds, and other such financial institutions around the world. It offers ACH transaction handling, electronic bill pay, mobile banking functions and risk management solutions, among other services. The company is a growth machine, building new products and acquiring others at a frenetic pace. It’s hard to see Fiserv losing its way going forward unless some tumultuous change totally upends the banking system.
Fintech Stocks to Watch #3: Guidewire Software
Guidewire Software, Inc. (NYSE:GWRE) is another fintech stock, like Fiserv, that makes money selling to existing large financial clients. In Guidewire’s case, its business comes from the insurance industry. Guidewire’s software platform is used by more than 350 customers, primarily in the property and casualty insurance segment, to manage their businesses.
Unlike Fiserv, Guidewire is a much newer company, and as such, its track record isn’t as established yet. That could be a good thing, though. At just a $7 billion market cap, GWRE stock could soar if the company’s robust 18%/year revenue growth keeps up.
At the moment, Guidewire doesn’t look especially profitable. That’s due to a string of acquisitions that have made the accounting look messy here. However, the company is expected to return solidly to profitability this year, and then grow earnings at 14%/year compounded over the next five. Arguably the stock is still too expensive here, at 11x sales. But for high-quality recurring subscription revenue in a high-profit business market, Guidewire could make investors a lot of money, especially if buying on a dip.
Fintech Stocks to Watch #4: QIWI plc
QIWI plc (NASDAQ:QIWI) is our international stop on the fintech stocks tour. QIWI is a leading Russian payments provider. The company currently has deployed more than 20 million mobile wallets, and has more than 50 million monthly customers. Major innovative tech companies such as Uber and Airbnb use Qiwi’s platform for payments in Russia. There’s a nice World Cup angle here, as most bookmaking in Russia involves Qiwi wallets, and sports betting should be booming this quarter.
The company also has more than 150,000 merchant payment terminals, and 13,000 active merchants. It also manages a sizable lender financing portfolio. All in all, Qiwi is a powerful multi-platform fintech play for Russia and Eastern Europe.
QIWI stock hasn’t gone anywhere in recent quarters, probably due to the fears about Russia. That should change, however. The company is trading at just 10x forward earnings, and grew revenues more than 40% last quarter. As if the company needed a kicker, it’s also a pioneer in the blockchain, offering both educational crypto classes to consumers and attempting to launch a cryptoruble coin for the Russian market. Bitcoin is down lately, but if it bounces back, the blockchain involvement could give QIWI stock an extra boost.
At the time of this writing, the author held no positions in any of the aforementioned securities.