Investors in the disruptive financial technology (fintech) space have lately been restless, while many fintech stocks have posted further losses in February. In fact, the pandemic-triggered rally started to cool down in late 2021.
As a result, fintech companies are in correction territory along with most other growth stocks. Rising interest rates and global headwinds, such as China’s tech crackdown, were the initial catalysts behind the volatility. Then, came increasing military tensions in Eastern Europe, which finally led to a war in the region.
Yet, some fintech innovations, such as contactless payments, buy-now-pay-later (BNPL) services, and the surge of neobanks, have been widely adopted over the past few years. Therefore, whatever fintech stock do in the near future, we’ll increasingly see fintech become part of our lives.
A recent study highlights, “The percentage of US consumers using technology to manage their finances jumped 52% year-over-year (YOY), from 58% to 88%… In comparison, more people now use fintech than video streaming services (78%) and social media (72%), placing fintech among the most widely adopted consumer technologies outside of the internet (93%).”
With many businesses and individuals worldwide relying on these services, the industry is poised to thrive in the foreseeable future. Thus, today we will discuss seven fintech stocks that might be worth watching in March:
- Global X FinTech ETF (NASDAQ:FINX)
- Goldman Sachs (NYSE:GS)
- Mercadolibre (NASDAQ:MELI)
- PayPal (NASDAQ:PYPL)
- Simplify Volt Fintech Disruption ETF (NYSEARCA:VFIN)
- Upstart (NASDAQ:UPST)
- Visa (NYSE:V)
Fintech Stocks to Buy: Global X FinTech ETF (FINX)
52-week range: $30.21 – $53.07
Dividend yield: 7.11%
Expense ratio: 0.68% per year
Our first discussion starts with an exchange-traded fund (ETF), namely the Global X FinTech ETF. It provides cross-sector exposure to the burgeoning fintech sector. The fund typically includes companies engaged in mobile payments, digital assets, marketplace lending, personal finance solutions or crowdfunding.
FINX, which started trading in September 2016, tracks the returns of the Indxx Global FinTech Thematic Index. The top ten holdings account for roughly 54% of the net assets of $844 million.
In terms of sector allocations, the ETF is heavily weighted toward information technology (77.7%), followed by financials (14%), industrials (4.7%), communication services (2.5%), and health care (1.2%).
Among the 65 stocks in the fund, Intuit (NASDAQ:INTU) has the largest slice, with a 7.8% share. Next are the Netherlands-based Adyen (OTCMKTS:ADYEY), Fiserv (NASDAQ:FISV), Block (NYSE:SQ), and financial software provider SS&C Technologies (NASDAQ:SSNC).
U.S.-based companies account for almost 70% of the stocks in the fund. They are followed by those from the Netherlands (6.2%), New Zealand (3.1%), China (3%), and Switzerland (2.7%), among others.
So far this year, FINX has dropped nearly 24%, and hit a 52-week low on Feb. 22. Trailing price-to-earnings (P/E) and price-to-book (P/B) ratios stand at 21.31x and 3.08x.
Recent analysis suggests the global fintech market is expected to grow at a compound annual growth rate (CAGR) of around 25.2% from 2022 to 2027, reaching a market value of $324 billion by 2026.
Due to the recent tech stock sell-off, FINX trades at historically low valuations. Therefore, investors seeking broader access to fintech could consider buying the fund at the current levels and also enjoy a juicy dividend yield of 7%.
Goldman Sachs (GS)
52-week range: $310.58 – $426.16
Dividend yield: 2.30%
Leading global investment bank Goldman Sachs delivers a range of financial services. It reports revenue in four segments: asset management, investment banking, consumer & wealth management, and global markets.
Management released fourth-quarter 2021 financials on Jan. 18. Revenue increased 8% year-over-year (YOY) to $12.64 billion. Net earnings came in at $3.94 billion, or $10.81 per diluted share. By comparison, net earnings in the prior-year quarter were $4.5 billion, or $12.08 per diluted share. Cash and equivalents ended the period at $261 billion.
“2021 was a record year for Goldman Sachs,” CEO David Solomon commented. The board also declared a cash dividend of $2.00 per share.
GS stock currently hovers around $345, down 10% year-to-date (YTD). Shares are trading at 8.63 times forward earnings and 2.05x trailing sales. The 12-month median price forecast for GS stands at $445, up around 29% from current levels.
Unlike most other fintech firms, Goldman’s traditional investment banking business makes it less vulnerable to market volatility in fintech. The recent drop in the GS share price has improved the risk/return profile.
Fintech Stocks to Buy: Mercadolibre (MELI)
52-week range: $873.40 – $1970.13
MercadoLibre is the largest e-commerce marketplace in Latin America, with more than 132 million users across 18 countries. The firm also operates complementary businesses, such as Mercado Envios in shipping solutions and Mercado Clics in advertisements.
Management announced Q4 financial metrics on Feb. 22. Revenues jumped to $2.1 billion, implying a YOY surge of 73.9% on a currency-neutral basis and 60.5% in U.S. dollar terms. Total Payment Volume (TPV) of $24.2 billion meant a YOY growth of 72.8% on a currency-neutral basis and 52.1% in USD.
Yet, due to higher operating expenses and foreign currency losses, net loss came in at $46.1 million. It translated into net loss of 92 cents per diluted share. In the previous-year quarter, net loss was $1.02 per diluted share. Cash and equivalents ended the period at $2.6 billion.
CFO Pedro Arnt said, “… The final outcome was a year with record results across the board, sustained strong growth in key business metrics and topline, and improving margins and operating income for a second consecutive year.”
MELI stock changes hands around $885, down over 30% since the start of 2022. The 12-month median price forecast for MELI is $1687.50, a 90% increase from the current levels. Shares are trading at 107.53 times forward earnings and 7.45x trailing sales.
52-week range: $101.71 – $310.16
California-based fintech titan PayPal enables digital and mobile payments between consumers and merchants. The company serves over 425 million active consumers in 200 markets worldwide. PYPL also owns Xoom, an international money transfer business, and Venmo, the popular person-to-person (P2P) payment platform.
The company released Q4 2021 financials on Feb. 1. Revenue of $6.9 billion was up 13% YOY. Total Payment Volume (TPV) reached $1.25 trillion, growing 33% on a yearly basis.
Non-GAAP net income was $1.3 billion or $1.11 per diluted share, compared to a non-GAAP net income of $1.2 billion or $1.08 per diluted share in the prior-year quarter. Cash and equivalents stood at $5.197 billion at quarter-end.
“2021 was one of the strongest years in PayPal’s history,” said CEO Dan Schulman. However, the company’s reported results did not meet most analysts’ expectations, falling short of the guidance.
Management expects revenues to grow by 6% in Q1 2022. But the non-GAAP earnings should be around 87 cents per diluted share, compared to $1.22 in the year-ago period.
After the release of the Q4 2021 results, the digital payment giant saw its largest selloff in a single day in its history. Having hit a 52-week low of $101.71 on Feb. 22, PYPL stock currently hovers shy of $110, down about 45% YTD.
Shares are trading at 22.32x forward earnings and 5.3x trailing sales. The 12-month median price forecast for PYPL stands at $190, an increase of 83.7%. Bullish investors might consider buying PYPL shares around $100, or even below.
Fintech Stocks to Buy: Simplify Volt Fintech Disruption ETF (VFIN)
52-week range: $5.75 – $14.10
Expense ratio: 0.96% per year
Next, we have another thematic ETF. The Simplify Volt Fintech Disruption ETF is an actively managed fund that provides exposure to disruptive companies related to the fintech space. It was first listed in late 2020.
XSD is a relatively small fund with roughly $1.5 million in net assets. It has 25 holdings. The top 10 stocks comprise over 60% of the fund’s portfolio.
Leading companies include Upstart; integrated payments processing group Shift4 Payments (NYSE:FOUR); Block, which was formerly known as Square; Canada-based Shopify (NYSE:SHOP), whose share price has come under significant pressure, and Tesla (NASDAQ:TSLA).
About a year ago in February 2021, VFIN went over $14. But, since then, it has lost more than half of its market value. The ETF is currently trading around $6, down over 30% since January.
52-week range: $42.51 – $401.49
Upstart offers a lending platform that depends on artificial intelligence (AI) to approve consumer loans. Customer applications get matched with offerings by Upstart’s bank partners. The fintech group has seen rapid adoption of its services, driven particularly by smaller banks.
Management released Q4 earnings results in early February. Revenue came in at $305 million, a record 252% YOY increase. Net income was $58.9 million, up from $1.0 million in the fourth quarter of 2020. Diluted EPS stood at 61 cents. Cash and equivalents ended the quarter at $250 million.
CEO Dave Girouard cited, “With triple-digit growth and record profits, Q4 was an exceptional finish to a breakout year for Upstart. 2021 will be remembered as the year AI lending came to the forefront…”
In the first quarter of 2022, the company expects revenue in the range of $295 to $305 million and adjusted net income of $50 to $52 million.
UPST shares currently hover around $120, down 20% YTD. Yet, the stock still trades at a lofty valuation of 14.66 times trailing sales. The 12-month median price forecast for Upstart stands at $237.5.
Fintech Stocks to Buy: Visa (V)
52-week range: $190.10 – $252.67
Dividend yield: 0.67%
Our final stock is Visa, the largest payment processor worldwide. The fintech name processed over $10 trillion in global purchase transactions in scores of currencies in fiscal 2021.
On Jan. 27, the company released better-than-expected Q1 2022 financials. Revenue was $7.1 billion, up 24% YOY. Net income came in at $4.0 billion or $1.83 per share, up 25% and 27% YOY, respectively. Cash and equivalents ended the period at $14.72 billion.
“The strength of our network, the growth in eCommerce, better than expected progress in the return of cross-border travel and a continuation of the recovery all contributed to an excellent quarter,” stated CEO Alfred F. Kelly.
On Dec. 20, Visa acquired Currencycloud, a global platform that enables banks and fintechs to provide foreign exchange (FX) solutions. It is also collaborating with Pagaya, a global AI infrastructure company, to enhance operations worldwide.
V stock hovers around $220, up 1% YTD (or roughly flat). Shares are trading at 31.55x forward earnings and 19.26x trailing sales. The 12-month median price forecast for V is $277.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.