3 Digital Bank Stocks to Buy Now


  • It wouldn’t be wrong to own all three of these digital bank stocks to buy.
  • SoFi Technologies (SOFI): Conservative growth prospects in a high-rate environment aren’t bad. 
  • Block (SQ): Cash App remains a superior growth vehicle.
  • Ally Financial (ALLY): Known for auto loans, its digital bank continues to gain deposits.
Digital Bank Stocks to Buy - 3 Digital Bank Stocks to Buy Now

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At the end of April, Bloomberg reported that C6, a Brazilian digital bank backed by JP Morgan Chase (NYSE:JPM), delivered its first quarterly profit in the first quarter of 2024. While it’s not a public company yet, there are digital bank stocks to buy that are.

While JPM owns 46% of the company, there are no plans for it to go public. It likes to remain out of the sight of public investors.

Digital banking is big and sure to get even bigger in the years ahead. According to the American Bankers Association, 71% of consumers prefer to manage their banking through a mobile app or computer. 

Who are the digital bank stocks to buy now? Here are three choices for you to choose from.

SoFi Technologies (SOFI)

SoFi logo sign on headquarters facade. Social Finance is an online personal finance company.
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SoFi Technologies (NASDAQ:SOFI) stock can’t return to double digits. The last time it consistently did so was in 2021. 

It tries, and it tries, and it tries, but every time it gets close, investors knock it back down into the mid-to-high single digits. It’s always something that’s nagging investors about its business model that keeps it down.

Most recently, it was the fintech’s disappointing Q2 2024 guidance, projecting $560 million in revenue for the quarter at the midpoint, about $21 million less than the analyst estimate. It expects $2.41 billion, up from $2.39 billion, for the year.

On the bottom line, it expects 8.5 cents in profits for the year, up from 7.5 cents in its previous guidance and half a cent higher than Wall Street. 

The big negative was the comment from the company that its lending revenues will be 5%-8% lower than in 2023, as it transitions to a more diversified trio of revenue streams. 

SoFi continues to add customers and deposits as its banking business grows. Restrained growth in a higher interest rate environment is a good thing. 

Block (SQ)

Block logo over a background with former square logo. SQ stock.
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The other time we discussed Block (NYSE:SQ) was in February when it was selected along with two other top 15 holdings from Cathie Wood’s Ark Innovation ETF (NYSEARCA:ARKK). ARKK is not having a good year, though. It’s down more than 12%, while Block is mostly flat in 2024. 

Between its Cash App and Square businesses, CEO Jack Dorsey’s got plenty to keep himself busy. Especially when you consider that it is down from late February by about 10%, despite trading at its lowest price-to-sales ratio since 2016.

It will continue focusing on the Cash App and the banking side of the business when it comes to growth. 

On May 2, Block reported Q1 2024 results that were much better than analyst expectations. On the top line, its revenue of $5.96 billion was $130 million higher, while on the bottom line, its adjusted earnings per share were 85 cents, 13 cents better than Wall Street’s estimate. 

“Seaport Research Partners analyst Jeff Cantwell was also optimistic, raising his target for the price to $101 from $95 and maintaining a Buy rating. The company ‘is showing strength operationally in this “new” phase as it focuses on optimization, while also investing to drive growth over the longer-term,’ he wrote,” Barron’s reported. 

Cash App’s gross profit in the first quarter was $1.26 billion, 25% higher than a year earlier. That resulted in a 12% operating margin. 

You should like where it’s headed in the banking realm.

Ally Financial (ALLY)

Man calculating finances on calculator. Finance. Finance stocks.
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Ally Financial (NYSE:ALLY) is the parent company of Ally Bank. Unlike the other two digital bank stocks, ALLY stock is up more about 12% in 2024, 266 basis points higher than the S&P 500.

On March 27, Ally named Michael Rhodes as its new CEO. He replaced Jeffrey Brown, who stepped down in January after nine years leading the financial services company.

Prior to his latest appointment, Rhodes was CEO of Discover Financial Services (NYSE:DFS). Before that, he was the head of Toronto-Dominion Bank’s (NYSE:TD) Canadian personal banking business

Needless to say, his experience of over 25 years in the industry makes him a very good hire. 

In the first quarter of 2024, Ally Bank added 103,000 net new customers in the quarter, bringing its deposit customers to 3.1 million. Approximately 315,000 of those customers have multiple products with the bank. 

Morever, its Consumer and Commercial Banking business had $145.1 billion in retail deposits, up $2.9 billion from a year ago with 92% of these deposits insured by the FDIC. 

In Q1 2014, its adjusted tangible book value per share was $21. A decade later, it was $46, more than double. 

It’s a solid digital bank stock to own for the long haul. 

On the date of publication, Will Ashworth 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.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

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