The fintech sector saw top plays go down ahead of the 2022 market selloff that hit the technology sector quite hard. You could say the fintech pure-plays were the tech-driven early warning signs, as rate fears started to drag share prices of top technological innovators lower.
A number of technology stocks have been off to the races for more than a year now, thanks to the ongoing AI tailwind. Still, fintech players, including those with AI exposure, have stayed lukewarm, even cold, of late.
As consumers begin to regain disposable income, and with an improving economic landscape, the battle for their businesses has a chance to intensify.
Let’s check out three fintech plays that could have what it takes as they look to catch up to the momentum in the tech scene.
SoFi Technologies (SOFI)
SoFi Technologies (NASDAQ:SOFI) stock took a hit last week as the firm announced intentions to offer $750 million worth of convertible senior notes.
Over the past five days, shares are now down more than 16%, as shareholders digest the bad news that stands to dilute their stake.
Capital raises are never a good sign, especially in a higher-rate environment that calls for higher margins and progress on profitability.
On the growth front, SoFi hopes to achieve 20%-25% compound annual revenue growth between 2023 and 2026. That’s still some serious growth, likely to be fueled by segments beyond loans. However, whether SoFi can make progress on margins from here, remains to be seen.
Though SoFi’s latest plans are sure to leave investors with a sour taste in their mouths, the neobank play is one of the market’s bigger beneficiaries from the Federal Reserve’s rate cuts. Perhaps, after a few cuts, investors will see more emphasis on the growth to be had than the firm’s push toward profitability.
Block (SQ)
Block (NYSE:SQ) is a fintech titan that’s getting a bit of sizzle back, with the stock up more than 49% from last year’s lows. Block has spent enough time in the penalty box, but it’s going to need to keep the good quarters coming if it’s to sustain its rebound.
If the consumer gets spending again, Cash App and Square could really start to accelerate. That said, there are sure to be road bumps along the way, as consumers face the ups and downs in a post-inflation environment.
On the plus side, the recent cryptocurrency rally bodes well for Jack Dorsey’s Bitcoin (BTC-USD). However, it’s still unclear how Block’s crypto-related projects will help the firm jolt growth in the long run. For now, increased interest in crypto trading will give Cash App investing a good shot in the arm among its young users.
Apple (AAPL)
Apple (NASDAQ:AAPL) stock has been stuck lately, trending lower even amid tech stocks’ latest run trending higher. Though a vast majority of headlines likely center around the iPhone maker’s generative AI strategy (and the lack of details the public has been provided with thus far) or its new Vision Pro spatial computer, it’s the fintech services business that also stands to move the needle on earnings growth in the coming years.
Apple Pay, Apple Wallet, Apple Card, Apple Cash and Apple Tap to Pay all offer a great deal of convenience to its massive install base. As Apple looks to capture a bigger chunk of digital and physical payments, the tech-driven disruptor could kick start to take share with its impressive value proposition (high-interest savings accounts for Apple Card holders), convenience and ease of use.
In short, fintech is a tailwind that Apple investors should not forget about as new devices and AI become the main focus.
On the date of publication, Joey Frenette held shares of Apple. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
