The stock market is unpredictable and sometimes volatile, which makes finding long-term purchases a bit of a challenge. However, if you can find an industry that looks poised to see impressive growth over the next decade, picking a winner is that much easier.
That’s one of the reasons I think fintech stocks are an absolute must for investors with a long timeline.
Fintech stocks are companies that are using technology to change the way that money is managed. From payment processors to lenders, the fintech space offers investors a huge growth opportunity. While there has been a lot of uncertainty surrounding other industries as of late, fintech is expected to see margin expansion, earnings growth and rising M&A activity over the next few years, making it a great place to stash your cash.
Here’s a look at four fintech stocks you should consider adding to your portfolio right now.
Fintech Stocks to Consider: GreenSky (GSKY)
GreenSky (NASDAQ:GSKY) went public back in May, and since that time the company hasn’t made it much above it’s $23 IPO price. The firm connects lenders with potential buyers at the point of sale, making it an asset to everyone involved in the transaction. Merchants have the ability to input basic information about a potential client and instantly approve them for a line of credit offered by one of GSKY’s lending partners, often interest-free for the first year.
Merchants pay a hefty fine to use the service, and that’s where GSKY makes the bulk of its money. However, the service is well worth the price for people trying to sell big-ticket items because it makes it much easier to convert a sale if the customer doesn’t have to go away and work out how they can afford the item before committing.
As mentioned, GSKY is fresh off a May IPO and its share price has been sitting below $20 as the stock finds its feet. However, unlike many of its tech peers, GSKY is already profitable and its high-margin business offers investors a great moneymaking opportunity.
Fintech Stocks to Consider: Mastercard (MA)
Newer doesn’t necessarily mean better when it comes to fintech stocks, and a great example of that is MasterCard (NYSE:MA). The payment processor has been making a huge push into digital security with strategic acquisitions and new initiatives that make it safer for customers to pay online.
This year the firm acquired NuData Security, which helps determine whether a transaction is fraudulent by learning about user behavior every time they make a transaction and using that information to asses new purchases.
Not only that, but the firm is also rolling out an account updater which will automatically keep customers’ billing information current for subscription services. That’s a game-changer for both customers and merchants because it eliminates hassle on both ends.
The enhanced security features and improving ease of transactions makes MA a top choice for both merchants and customers. The company has proven that it won’t be left behind as payments shift online, and that makes it a great long-term play.
Fintech Stocks to Consider: PayPal (PYPL)
It would be impossible to talk about Fintech without including the OG of the space — PayPal (NASDAQ:PYPL). Don’t get me wrong, the company has hit a few bumps in the road– namely the fact that eBay (NASDAQ:EBAY) has been trying to separate itself from the payment processor — but the future still looks bright for PYPL stock.
PayPal has relationships with 19 million merchants and has some 237 million active consumer accounts. Because of the company’s massive reach, there’s a compelling case for both customers and merchants who haven’t already joined to sign up, which gives the firm an impressive competitive advantage against rivals looking to enter the space.
PayPal is also building out a platform called Venmo, which facilitates peer-to-peer payments and will allow PYPL to keep a much larger percentage of its transaction fees than its existing service. As it’s still in the early stages, Venmo has been a drag on PYPL’s earnings but once the platform is up and running it could be a real boon to PayPal’s business.
Fintech Stocks to Consider: Square (SQ)
Another payment processor to consider is Square (NYSE:SQ). The company takes a different approach than PayPal, allowing merchants to choose how they want to accept payments and offering a simple interface with which to do so. Square initially gained traction with its point-of-sale devices that allowed small businesses to accept credit card payments at places like fairs and outdoor markets.
The simplicity that Square offers doesn’t have the same draw as PYPL’s convenient, one-click ordering, but the convenience factor for small- and medium-sized business owners appears to be enough of a hook to help the firm grow.
Revenue for SQ was up about 50% last quarter and the firm is expected to put out more bumper results at the beginning of August. Not only does SQ have a long growth runway in the payment processing space alone, but the company’s shift into subscription and small-business services, like loans, are likely to continue padding the bottom line.
SQ is definitely expensive at its current valuation, but looking at the long-term picture, the stock looks like a winner.
As of this writing, Laura Hoy did not hold a position in any of the aforementioned securities.
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