3 Fintech Stocks About to Post Multibagger Gains This Year


  • These overlooked fintech stocks are poised for massive upside as interest rates come down and financial stocks regain favor.
  • PayPal (PYPL): Trading at a mere 17-times earnings, this fintech titan’s long-term growth potential is being grossly underestimated by the market.
  • Block (SQ): One of the fastest-growing fintech companies in the world in the large-cap space. 
  • StoneCo (STNE): This Brazilian fintech firm is ahead of the curve, benefiting from the nation’s early action on interest rates.
fintech stocks - 3 Fintech Stocks About to Post Multibagger Gains This Year

Source: shutterstock.com/ZinetroN

Fintech stocks have been Wall Street’s wallflowers for what seems like an eternity now. While flashier industries like AI, cloud computing, and renewable energy have been hogging the limelight, fintech stocks have been left out in the cold. But I believe their time in the sun is finally coming.

Despite being overshadowed, many top fintech companies have been quietly strengthening their core businesses. They’ve been retaining robust growth trajectories, while boosting profitability and shoring up their financials. In other words, they’ve been doing the hard work to build solid fundamental foundations.

However, Wall Street has been too distracted by the next shiny object to notice. The financial sector itself has been out of favor as well, with investors favoring more exciting areas of the market. But that’s all about to change in my view.

With the Federal Reserve signaling interest rate cuts are on the horizon to support the slowing economy, I expect renewed enthusiasm and activity in financial stocks. And when that excitement spreads, the following fintech stocks could get their due.

PayPal (PYPL)

PayPal logo and front of headquarters

PayPal (NASDAQ:PYPL) has been stuck in the doldrums for far too long, with its stock price languishing below $100 for over two years now. As I write this, PYPL stock trades at merely $65 per share. That’s a valuation that I believe grossly underestimates this fintech titan’s potential. We’re talking about one of the most well-established players in the digital payments space, boasting virtually universal vendor acceptance. Outside of the heavyweight duo Visa (NYSE:V) and Mastercard (NYSE:MA), no other fintech company can match PayPal’s ubiquity.

Yet, despite its dominance, the market seems to have forgotten PayPal’s merits, with share trading hands at a paltry 17-times earnings. In my view, that’s an absolute steal when you consider the company’s long-term growth runway ahead. Sure, critics will point out PayPal’s recent stagnation in user accounts growth. But I’m confident that as interest rates ease and online transactions rebound, that metric will turn positive again. And even if it doesn’t, PayPal has proven its ability to wring out impressive top-line growth from its existing user base while delivering stellar profits.

What really excites me, though, is PayPal’s aggressive share buyback program. This year alone, the executive team plans to repurchase a staggering $5 billion worth of stock. That’s on top of the $5 billion they scooped up in 2023. With that kind of commitment to enhancing shareholder value, I’d argue that PYPL stock represents one of the best risk-reward plays in the fintech space right now.

Block (SQ)

Square, Inc. changes name to Block (SQ). Smartphone with Square logo on screen in hand on background of Block logo.
Source: Sergei Elagin / Shutterstock.com

Block (NYSE:SQ) has been another casualty of fintech stocks’ prolonged malaise. Like its rival PayPal, Block has spent the past two years stuck in the mud, unable to muster any meaningfully sustained upward momentum despite its impressive growth credentials.

What sets Block apart, however, is its status as one of the fastest-growing fintech companies out there. That’s a distinction coming with the caveat of relatively slimmer profit margins compared to more mature players. Just a few quarters ago, this company was deeply unprofitable. But even after drastically improving its bottom line, with rapidly-expanding margins, the stock has remained frustratingly range-bound.

I suspect that once the broader fintech tide turns, though, SQ stock will absolutely soar. Need proof? In 2022, the company reported $17.5 billion in revenue alongside $540 million in losses. Fast forward to 2023, and Block is trading at virtually the same stock price despite posting $22 billion in revenue and a $10 million in profits. What’s more, growth has actually accelerated, with the top line expanding 25% last year. Moreover, double-digit growth is projected for the foreseeable future.

When the market finally wakes up to this company’s immense potential, you’ll want a piece of the action.

StoneCo (STNE)

a credit card reader with a credit card in it
Source: Shutterstock

While PayPal and Block have been stuck in neutral, the Brazilian fintech firm StoneCo (NASDAQ:STNE) has managed to get a head start. Unlike the U.S., which waited far too long before tackling soaring inflation, Brazil took decisive action early by aggressively hiking interest rates. With price pressures now easing, the nation is already cutting rates – putting StoneCo ahead of the curve in the geopolitical realm.

And sure enough, the stock has responded in kind, rallying more than 80% from its pandemic-era lows. I don’t think the party’s over, though. I believe this fintech stock still has ample room to run given its compelling growth trajectory. Analysts expect StoneCo’s revenue to swell from $2.6 billion in 2024 to an impressive $4.1 billion by 2027. Over that same period, earnings per share are projected to double from $1.30 to $2.60.

For that kind of top- and bottom-line expansion, a forward price-earnings ratio of just 12-seems like a bargain to me. Keep in mind, this stock used to trade north of $44 before the pandemic struck. That’s a level I firmly believe it can surpass within the next couple of years as Brazil’s economy gains steam.

On the date of publication, Omor Ibne Ehsan 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.

Omor Ibne Ehsan is a writer at InvestorPlace. He is a self-taught investor with a focus on growth and cyclical stocks that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as cryptocurrencies and penny stocks. You can follow him on LinkedIn.

Article printed from InvestorPlace Media, https://investorplace.com/2024/04/3-fintech-stocks-about-to-post-multibagger-gains-this-year/.

©2024 InvestorPlace Media, LLC