Financial technology companies, or fintech, are firms that apply technology to banking and finance. Think mobile banking stocks, payment apps and digital money transfers.
Nearly half of Americans said they had used a mobile wallet in the past three months, according to a recent survey by J.D. Power. As consumers migrate more and more of their lives online, the fintech revolution rages on. Even traditional banks that have networks of retail branches are moving more of their services into the digital sphere, enabling customers to bank, manage and apply for loans, and make payments using their smartphone or with the click of a mouse.
Fintech stocks have struggled over the past two years, taking a beating in the recent bear market. The names below represent the top three mobile banking companies that could deliver outsized gains in 2023.
Fintech company Block (NYSE:SQ), formerly known as Square, has been battered and bruised, losing three-quarters of its value over the past two years. In addition to investors fleeing fintech stocks in 2022 and the massive sell-off in cryptocurrencies (which Block owns a lot of), the company was hit with a negative report from Hindenburg Research. The notorious short seller accused Block of taking a “‘Wild West’ approach to compliance” and facilitating “criminal activity and fraud” on its platform. Block denied the allegations, but the report sent SQ stock plunging 15% in a single trading day.
Down 38% over the past 12 months, SQ is up about 15% from its 52-week low, made in early November. Investors may want to consider taking a position here, as there are reasons to be cautiously optimistic about Block and its role in the fintech space.
The company’s Cash App mobile payment service remains extremely popular, particularly among small-business owners and the self-employed. The company is also pushing further into crypto with a new Bitcoin (BTC-USD) mining strategy that comes as the price of BTC skyrockets this year.
Global Payments (GPN)
Global Payments (NYSE:GPN) is a fintech company that has been around in one form or another since 1967 and provides payment technology and services to both merchants and consumers. While shares are down 48% over the past two years, they have rallied 14% since hitting a 52-week low in late 2022.
Recently, GPN stock snagged an upgrade from analysts at investment bank Goldman Sachs, which raised their rating on the fintech company to “buy” and gave shares a $127 price target. This implies upside of 21% from current levels.
On May 1, the company delivered a first-quarter earnings beat and announced a quarterly dividend of 25 cents a share, giving shares a yield of 1%. In a surprise move, Global Payments also said longtime Chief Executive Officer ( ) Jeff Sloan is stepping down after nearly a decade at the helm. He will be replaced on June 1 by current Chief Operating Officer ( ) Cameron Bready.
While the stock sold off nearly 9% on the news, it has regained some ground. Of the 35 analysts who cover GPN, 29 rate it “overweight” or “buy.” Their median price target of $135 is 29% above where shares currently trade.
SoFi Technologies (SOFI)
SoFi Technologies (NASDAQ:SOFI), which specializes in bank transactions and arranging student and vehicle loans through its mobile app, has seen its share price collapse 69% over the past two years. A big part of the problem has been the moratorium placed on student loan repayments during the pandemic, followed by the student loan forgiveness program pursued by the Biden administration.
Another issue has been the fact that SoFi Technologies remains unprofitable. The company did just report earnings that beat Wall Street expectations on both the top and bottom lines. Yet, the stock fell as investors seemingly took issue with the forward guidance provided by the company.
Despite its issues, there are signs that the worst might now be over for SOFI stock. Student loan payments are likely to resume by the end of August, and management expects to reach profitability by the end of 2023. Shares are up 12% year to date despite the post-earnings sell-off.
On the date of publication, Joel Baglole 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.