With the rampant digital transformation of society, investors could be looking at $1.25 trillion “in additional market capitalization across all Fortune 500 companies,” according to Markets and MarketsDeloitte. All as millions of companies integrate newer digital technologies into corporate operations, and rethink ways to provide further consumer value. Banks, for example, are fast-tracking digital transformation efforts to meet the demand for far more efficient, personalized financial services. In fact, here are some of the top growth stocks to consider as the story explodes.
Plus, according to a Broadridge Report, “A majority of financial services firms now view digital transformation as essential to their business and are doubling down on their financial commitments as they anticipate further widescale adoption of the new and more powerful tech. According to the survey, firms now spend 27% of their overall IT budget on digital transformation – a 16 percentage point increase versus the same 2021 study.”
That being said, investors may want to consider these growth stocks that are benefiting from the digital transformation trend.
Digital Realty (DLR)
Let’s start out with growth stocks, like Digital Realty (NYSE:DLR). With a yield of about 5.2%, the DLR real estate investment trust (REIT) owns, acquires, and operates data centers. All of which will be beneficial for the stock. As organizations go digital, they’ll need the data centers that DLR provides. Plus, according to CEO Andy Power, the REIT “may now be on the precipice of the next wave of demand that will drive our sector for the next decade.”
Plus, as businesses transform their IT infrastructure, their needs will grow along with their data center requirements. In addition, as internet based products become further integrated into people’s lives, data centers are quickly becoming powerhouse opportunities.
SoFi (SOFI)
Or, take a look at growth stocks like SoFi (NASDAQ:SOFI). SoFi is a digital financial services company that’s making it easier for users to manage their money in one app. On top of that, analysts love the stock. Mizuho Securities, for example, reiterated its buy recommendation on SOFI with a $9 target. The firm’s analysts were encouraged by the company’s capability for real-time monitoring of deposits, in addition to its declining competition. Piper Sandler points out that SoFi is also less likely to suffer from the financial contagion that hit Silicon Valley Bank.
Far better, the company recently blew earnings out of the water. SoFi said during its Q4 2022 earnings call it expects to be profitable on a GAAP basis by the fourth quarter. In its most recent quarter, SOFI’s Q4 loss narrowed to $40 million, or 5 cents a share. Analysts were only looking for a 9 cent loss. Adjusted EBITDA came in a $70 million, which was ahead of the $5 million adjusted EBITDA year over year.
Plus, as also noted by Mizuho, “The big beat on revenue and adjusted EBITDA are major positives of the 4Q results. The promise to deliver positive GAAP net income in 4Q 2023 should be well-received, as GAAP losses have been a key deterrent in 2022 for FinTech investors.”
FinTech ETF (FINX)
Or, look at an ETF such as the Fintech ETF (NASDAQ:FINX). With an expense ratio of 0.68%, the ETF invests in companies on the leading edge of the emerging financial technology sector. This includes industries that are currently transforming like insurance, investing, fundraising, and mobile and digital solutions. Some of FINX top holdings include PayPal (NASDAQ:PYPL), Fiserv (NASDAQ:FISV), Block (NYSE:SQ), Global Payments (NYSE:GPN), and Coinbase (NASDAQ:COIN) to name a few. Plus, we have to consider that according to Global X in 2020 the number of online banking consumers was nearing 1.9 billion, and by 2024 that could be up to 2.5 billion. All thanks to the digital transformation of society.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
