Fintech stocks have endured quite the fall in recent years. Unlike most tech sectors, many of the market’s most innovative fintech stocks remain down and out, barely participating in last year’s tech-focused market recovery. Indeed, it’s not hard to imagine that many investors have moved on from the companies with high hopes of disrupting the status quo in finance and banking toward “hotter” trends, like generative artificial intelligence.
At their peak, fintech stocks were wildly overvalued, given the potentially unrealistic expectation that they’d erode the economic moats of some of the world’s largest financial institutions. After a devastating crash, fintech may be too cheap to pass up, whether you’re a value or growth investor.
In this piece, we’ll look at a trio of beaten-down fintech stocks that can continue innovating to keep their larger, old-school financial rivals on their toes.
PayPal (PYPL)
PayPal (NASDAQ:PYPL) is the original digital wallet company that’s since lost its edge and a considerable amount of its value (around 80%) since peaking in 2021. Despite heightened enthusiasm surrounding the tech scene in 2023, PYPL stock finished the year in the red, down nearly 20%.
What’s behind PayPal’s lack of participation in last year’s epic tech rally? Investors are growing impatient when it comes to the firm’s turnaround plans. More recently, a few big-name analysts also grew tired of waiting, downgrading the stock to the equivalent of “hold.”
Oppenheimer noted that it would take some time to stabilize operating margins without cutting costs, which is one of the reasons behind its downgrade. Undoubtedly, PayPal seems to be up against it again in 2023. But the stock is now cheap enough to be a value play, and with every bullish analyst that turns neutral (or bearish), expectations for the payments firm become much easier to pounce over.
At 17.95 times trailing price-to-earnings (P/E), I believe it’s hard not to love PYPL stock if you’re in the market for a turnaround play and are patient enough to wait for a comeback.
Block (SQ)
Block (NYSE:SQ) is another red-hot fintech titan that’s since been (mostly) forgotten about in recent years. Like Block and other fintech stocks, the stock is nowhere close to its all-time high. SQ stock is down over 76% from its 2021 peak after a relatively flat 2023. Unlike top rival PayPal, however, Block has a good amount of newfound momentum behind it since bottoming back in October 2023 at $39 and change per share.
Block has given back 7% in the first week of 2024, partly thanks to the broader market pullback. Still, the dip seems more like an opportunity to buy than a reason to make a run for the exits. Last month, Block pulled the curtain on a self-custody Bitcoin (BTC-USD) wallet.
The move is intriguing and could help position Block for continued recovery gains as the cryptocurrency asset class gains momentum again. There could be significant demand for Block’s latest offering, given it takes third-party risk out of the equation. Once again, Block has shown it’s serious about Bitcoin and crypto. Investors serious about crypto and blockchain innovation ought to give the firm a second look while it’s still down and out.
Coinbase (COIN)
Speaking of crypto and Bitcoin, Coinbase (NASDAQ:COIN) stands out as another firm to play the future of crypto and various other blockchain technologies. From crypto wallets to NFT (Non-Fungible Token) marketplaces, Coinbase stands out as a must-watch stock for investors seeking to play the exchange and brokerage side of the crypto markets. It’s a smart way to play crypto and may continue to be one of the most rewarding ways 2024.
For 2023, Coinbase stock skyrocketed, almost clocking in 400% on the year, making it one of the year’s top performers. The crypto market’s recovery undoubtedly helped contribute to COIN stock’s explosive comeback. With a crypto ecosystem that stands to strengthen over time, there are plenty of reasons to stay aboard the ride.
It’s only prudent to consider profit-taking if you’re up more than 300% in a name in just one year. While last year saw euphoric gains, it’s still worth noting that COIN stock remains down more than 55% from its 2021 highs.
The fintech stock looks incredibly expensive at 13 times price-to-sales (P/S), and there’s a good chance the coming Bitcoin ETF may not be as hot as expected. I’d much rather wait for a pullback before jumping in.
On the date of publication, Joey Frenette did not hold (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.
