Money is a core pillar of the economy, and many firms have positioned themselves to profit from the strong demand for capital. Consumers spend, save and invest money. And frequently, people need to borrow money to purchase goods and services.
Fintech stocks allow investors to accumulate wealth from these trends. Some companies offer innovative solutions for people who need access to money and want to achieve their financial goals sooner. However, it’s not just consumers. Also, small businesses work with fintech companies to access more capital and reach additional customers.
The fintech industry is vast and filled with promising potential. Let’s delve into some of the top fintech stocks to consider.
Nu Holdings (NU)
Nu Holdings (NYSE:NU) has outpaced the stock market with a 44% year-to-date (YTD) gain. The Brazilian digital bank is gaining market share in Latin America and has become the region’s top digital bank.
The company closed Q4 of 2023 with 93.9 million customers. It’s a 26% year-over-year (YOY) improvement. Nu Holdings hasn’t had any issues with generating more revenue from its growing customer base. Revenue surged by 66% YOY, but profits growth was even better. Net income went from $58.0 million in Q4 of 2022 to $360.9 million in Q4 of 2023. That’s a 522% YOY increase!
In addition, Nu Holdings is growing at a fast rate in multiple verticals. Customers are making more deposits, putting their money into investments, taking out personal loans and spending on their credit cards. The fintech firm is well-diversified and has healthy profit margins. And, it has less overhead than traditional banks which translates into higher earnings. NU has been a good ride for shareholders over the past year.
American Express (AXP)
American Express (NYSE:AXP) trades at a reasonable 19 P/E ratio. The credit and debit card issuer is expanding its profit margins and has an ambitious multi-year growth plan. Leadership believes it can achieve 9% to 11% YOY revenue growth and mid-teen EPS growth beyond 2026.
Moreover, the fintech firm delivered healthy results in Q1 2024 that suggest it can maintain those lofty standards. Revenue was in line and grew by 11% YOY. And, net income growth stood out as the $2.4 billion, which was a 34% YOY improvement.
Also, American Express excites investors due to its appeal among Millennials and Gen Z consumers. More than 60% of opened accounts in Q1 2024 were from this group. The company offers a 1.21% dividend yield. The firm has increased its dividend by an annualized 10.51% over the past decade. Finally, American Express raised its dividend by 17% this year, making it an enticing dividend growth stock.
Sofi (SOFI)
SoFi (NASDAQ:SOFI) is another digital bank that is gaining traction. The firm saves on overhead since it doesn’t need physical branches, and that translates into better rates and terms for its customers.
The stock has been a roller coaster for several years, but the company has been posting appealing financial results. In the first quarter of 2024, SOFi reported $645 million in net revenue and $88 million in GAAP net income. The company’s profit margin hit 13.6%, representing a significant improvement. And, Q1 was SOFI’s second consecutive quarter of GAAP profitability.
Furthermore, Sofi raised its FY24 guidance, and revenue increased by 37% YOY. SOFI added 622,000 members and closed the quarter with more than 8.1 million members. Memberships grew by 44% YOY. The company is diversifying away from its lending segment which was down by 2% YOY.
Thus, SOFI is gaining mainstream attention. It’s the official bank of the National Basketball Association (NBA) Sp that designation will result in additional exposure. Currently, the stock has a $7.3 billion market cap and plenty of potential. GAAP profitability makes it more attractive.
Fiserv (FI)
Fiserv (NYSE:FI) is a financial services firm that connects businesses and financial institutions. Businesses use the company’s platform to accept payments, track performance and drive sales. Once companies use Fiserv to manage their finances, it’s hard to switch platforms due to the time commitment and other factors.
More than 70% of the world’s leading brands use Fiserv, and the company’s vast customer base has translated into solid gains for investors. The stock is up by 12% YTD and has jumped by 75% over the past five years. Currently, the $87 billion corporation has a 28 P/E ratio.
The fintech firm grew its GAAP revenue by 7% YOY in Q1 2024. GAAP EPS growth was even better and came in 39% higher than the same period last year. Fiserv affirmed guidance which points to 15% to 17% YOY organic revenue growth for full-year 2024. Analysts are optimistic on the stock and believe it can gain 15% from current levels.
Robinhood (HOOD)
Robinhood’s (NASDAQ:HOOD) claim to fame is its brokerage platform. It was one of the first brokerage firms to introduce zero commissions on stock trades, and it’s also been a pioneer in the cryptocurrency industry. Robinhood was one of the first brokerage firms to enable crypto trades, while other firms are catching up.
The company’s foray into innovative financial products and services can create more opportunities. Investors are monitoring the company’s unlimited 3% cashback credit card that is available for Robinhood Gold members. Also, fintech firm has an impressive 3% match for IRA contributions.
Very few financial institutions and fintech companies have these types of offers. Most companies don’t match any of your IRA contributions. Robinhood can gain more ground as it releases innovative products and its trading platform continues to perform well. While the fintech company has fallen by 49% since its IPO, the stock is up by 45% YTD. Therefore, investors are starting to realize Robinhood’s potential, and a recent switch to profitability has helped matters.
PayPal (PYPL)
PayPal (NASDAQ:PYPL) stock has been decimated in recent years but suddenly looks like an enticing value stock. Shares are down by 41% over the past five years but have rallied by 7% YTD. The stock trades at a 16.5 P/E ratio and offers double-digit profit margins.
Revenue jumped by 9% YOY in Q1 2024 while GAAP EPS was up by 18% YOY. However, growth is expected to decelerate in the upcoming quarters. That’s why the P/E ratio is appropriately much lower than it was a few years ago.
PayPal anticipates revenue growth to range from 6.5% to 7% YOY in Q2 of 2024. Also, it expects a slight decline in GAAP EPS for fiscal 2024. PayPal believes this metric will drop from the previous year’s $3.84 per share to approximately $3.65 per share. The company cited one-time positive impacts on 2023 EPS from its sale of Happy Returns and successes from PayPal’s strategic investment portfolio.
Those benefactors contributed to $0.38 per share in 2023. Removing those advantages only results in $3.46 EPS in 2023. This reduced EPS indicates a 5.5% YOY growth rate for EPS in 2024. It’s still a low growth rate, but PayPal trades at an appropriate valuation and is the go-to payment method for more than 400 million users.
Bank of America (BAC)
Bank of America (NYSE:BAC) is a well-run financial institution that offers a respectable 2.58% yield and trades at a 13 P/E ratio. The stock has gained 10% YTDand is up by 34% over the past year.
One of Warren Buffett’s favorites, it’s still delivering impressive profit margins. BAC generated $6.7 billion in net income and $25.8 billion in revenue. Both figures are slightly down YOY but resulted in a 27.2% net profit margin.
In addition, Bank of America has withstood many economic cycles since its founding, including the Great Depression. The bank dates back to 1904 back when it was named the Bank of Italy. Investing in durable companies can lead to steady returns and high cash flow.
The financial institution wrapped up its 21st consecutive quarter of account growth. It added approximately 245,000 new consumer checking accounts, bringing the total consumer checking accounts to 36.9 million. Small business checking accounts grew by 2% YOY to reach 3.9 million. Wealth and Investment Management revenue increased by 5% YOY to reach $5.6 billion.
On this date of publication, Marc Guberti held a long position in SOFI. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
