The mission today is to find seven best fintech stocks to buy. The sector has already suffered tremendous devastation on Wall Street. This month may be time for a starting a change. It probably won’t happen overnight, but the pendulum could be close to reverse. In part of the discussions, we will also have to touch up on what’s going on with Bitcoin (BTC-USD) and the cryptosphere.
These great stocks have been falling for more than almost a year incessantly. What made them so attractive to investors last year has become toxic now. The overall market malaise is a contributor, but their pain started a bit earlier and is harsher. Even these best of the best fintech stocks have lost 80% of their value. The puzzle is that their fundamentals are still near record levels.
Innovation in financial technology has been the reason to own the best of fintech stocks. The leaders have taken part of the blockchain theme which supports the crypto revolution. But since Bitcoin crashed 70% from its highs, new fintech stocks lost an important catalyst. The association with crypto and blockchain became dead weight.
To prove the point I’m overlaying crypto chart with three of the top seven best fintech stocks were discussing today. You can see how they are trading in tandem with BTC (white line), and not tracking SPY (blue). Therefore it is important for BTC-USD to find support soon. Luckily, this here has been my target since November so it could happen. However there is now a secondary target lower that could extend the loss as much further.
In the end Bitcoin may break below $10,000. Therefore the stocks we discuss today might have some external fat to shed from their sympathy tie to crypto. Else, on their own they have no weaknesses that warrant the sell-off they’ve received. There’s also the wrinkle that is the war that the U.S. Fed is waging against equities.
They must ease up on their rhetoric before they destroy the economy, otherwise all stocks may continue to correct. There is a reasonable scenario that would place the NASDAQ 25% lower by August. We can still avoid it, but we must admit that the threat is there. But to be safe I would not take any all in positions until we learn more.
Block (NYSE:SQ) burst onto the scene in 2009 and it hasn’t stopped innovating. The company financial results speak well of their efforts. According to Yahoo Finance, management has quintupled their revenues in under five years. More importantly they are doing this without building bloat. Even though their Net income shows a loss, they generate almost a billion in cash from operations.
That’s a sign of strength and team acumen. Aggressive companies spend most everything they earn to grow. This is not a squandering effort when the results offer testament. Sadly the investment community has shunned SQ stock for a while. Eventually when risk appetite returns they will seek quality in all sectors. Among them SQ will stand out as the best of fintech stocks to buy, maybe as early as now.
The technical show resistance, but if the bulls clear $66 per share they could trigger a bullish scenario. Momentum buyers may start the wave, then value investors would follow later. Quality usually rises, and all SQ stock needs is a bit of upside pressure from the indices. Watch out for Bitcoin prices because they are influencing what happens to SQ. Leave room for error just from that perspective too.
Everything we’ve already said about SQ applies to PayPal (NASDAQ:PYPL) stock. They are similarly in many ways, as they both rose to challenge the incumbent legacy credit card companies.
PayPal emerged about a decade before Block, and they have been growing since. They’ve also made a good strategic acquisitions. Even Venmo is now one of their subsidiaries, and it’s becoming a verb in normal conversation.
The financials for PYPL stock are as impressive as SQ’s. They didn’t quite quintuple their revenues but it’s harder to do at size. PYPL sales are 1.5 times larger already and they are more mature. The growth ramp is steeper in earlier stages of the company. The bottom line is that PayPal fundamentals are solid, yet investors hate it. Unless there is a secret skeleton in the close, when markets stabilize buyers will come back to it.
Short term, there are resistance lines between $72 through $74 per share. So far the support hasn’t held long, but it still has some at $69 and $67.7. If I would only choose one of these two best fintech companies, it would be SQ.
The first ‘BankAmericard,’ Visa (NYSE:V) card is older than I am, and I am no spring chicken. So it definitely belongs on the list of best fintech stocks to buy.
Currently, V stock is in the middle of a range that’s been steady for over a year. In comparison this stability is refreshing consider the overall equity volatility. But if the goal is to make money from appreciation we should do some digging.
Since last summer, investors have defended V stock going into $190 per share. I expect them to do it again. But just in case they don’t, investors should only deploy partial positions now. This means that if already long, it would be a potential mistake to add risk. If V stock falls below $170, then it would be a spot to pounce more seriously or add to risk.
There is no need to delve into their financial health, because they are fortresses. They operate in under heavy regulations especially after the 2008 financial crisis. There is very little wrong except that they are slow moving slugs comparing them to say Block or PayPal.
MasterCard (NYSE:MA) stock financials are not as large as Visa’s. But they too doubled their revenues and net income in seven years. Clearly management is firing on all cylinders and there are no knocks against them internally. So the stocks suffer more from market sentiment flips than operational success.
Currently the Fed’s efforts to kill spending will affect the earnings power for these transactors. So from that perspective, there is a potential swoon on the horizon. There is reasonable doubt that Fed will fail in slowing down the economy too badly. I bet they are bluffing with how high they want to take rates. Too high and they would cause insolvency problems. That would be a national balance sheet problem that the White House would want to avoid.
As long as the bulls keep MA stock above $300, then they remain in control. The have a strong base that extends $20 lower in case they need it. Either way, dips would make for good buying opportunities. MA stock is even now below the 2020 pre-pandemic highs. Therefore there isn’t much ‘free money’ froth in it.
American Express (AXP)
Of the three famous old dogs, America Express (NYSE:AXP) is the oldest. They issued their first card, which was multinational, in 1958. Age has its privileges. I am referencing to their slogan “membership has its privileges,” so it is one of the best fintech stocks still. AXP revenues are 1.8 times larger than Visa’s, so investors should respect it.
Oddly enough their net income loses out to V stock. This puts a knock against them in my book. So it wouldn’t be the one I pick of the three old fintech companies. However and judging by the AXP stock action, investors may not share my concerns. This is if you judge it relative to the pre-pandemic levels. But the technical analyst eye in me see the bulls lost an important line.
AXP $150 per share was important to hold, but they failed. So now it risks becoming forward resistance. It is not always the kiss of death, but it is important that they recover it and hold quickly. Just in case, I’d rather delay entry here for a few days at least.
While I like the business line of SoFi (NASDAQ:SOFI), I dislike its position with Wall Street. Investors give it no mind so big money is bearish on SOFI stock. It shows tremendous potential on certain days, only to crash and make new lows soon thereafter. But this will eventually change, if management continues to execute on plans this well.
According to Yahoo Finance SoFi more than quadrupled its revenues in four years. That is hardly a reason to sell the stock down like it’s going out of business. The sticky point is probably that they are spending a lot to accomplish it. So the worry is that rising rates could crimp management’s availability to cash. I am willing to give them the benefit of the doubt and still seek a bottom.
Clearly I classify this as a speculative bet on an already controversial industry it seems. It would rank on the low end of my best fintech stocks to buy. The resistance levels are lurking near $5.75 and $6. That is where dark pool money becomes active (tradytics.com subscription source). I imagine that it could be a slog until the bulls clear them.
Almost all the arguments I made for SoFi apply to Affirm (NASDAQ:AFRM) stock. This is also a relatively new entrant but one that is doing well operationally. I come across their digital marketing everywhere and even in my inbox.
In fact Affirm’s financial statistics are even better than SoFi. According to Yahoo Finance they grew revenues almost five times since 2018. It is hard to argue with these results even if management is also spending a lot for it. Eventually they will reap the rewards of risking money now. Just ask Amazon (NASDAQ:AMZN) or Tesla (NASDAQ:TSLA).
Just like SOFI, AFRM stock is out of favor among investors and for a while. There is nothing but visible resistance above and no functional support. However, the last two bounce levels from June and May are actual support. The stock bounced off them sharply so the buyers have that opportunity to repeat. If they fail, each line will become an accelerator lower. I don’t think that happens unless the S&P 500 is also correcting.
On the date of publication, Nicolas Chahine 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.