Investors’ confidence in the financial technology sector, or fintech, has plummeted in 2022. These stocks have underperformed the S&P 500, down 14.4 percent as of December 2. While investors in the financial technology industry might be inclined to turn the page and move on, Wellington Management analyst Matt Ross predicts the industry will see a resurgence in 2023, providing a great chance to buy financial technology companies at a discount. Given this circumstance, the following seven fintech stocks are interesting stocks to buy in 2023.
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What Is Fintech Stock?
The term “Fintech” is a portmanteau of “finance” and “technology.” It refers to a broad group of enterprises that employ modern technology in financial industries. For instance, it includes organizations that create and operate person-to-person payment apps and develop and implement innovative digital payment processing solutions.
Top 7 Fintech Stocks to Buy in 2023
Ticker Symbol: SQ
Block is the biggest holding in FINX and ARKF, with weights of 7.4% and 11.5%, respectively. Recently, Baird analyst David Koning upgraded the parent company of Square, Cash App, and Afterpay from neutral to outperform. The analyst maintained his neutral recommendation on Block’s shares for two years until upgrading it on January 3. Koning boosted his price objective by $16 to $78, an increase of 11% from the present price.
According to Koning, the company’s huge cash balance of $4.6 billion as of September 30 should produce an extra $160 million ($0.20 per share) in pretax income in 2023, assuming interest rates rise by 2% this year.
In addition, Block’s third-quarter report highlighted year-over-year revenue growth of 17% to $4.52 billion, gross profit growth of 51% to $774 million for Cash App, and 29% to $783 million for Square. Adjusted profits before interest, taxes, depreciation and amortization increased by 40% from Q3 2021 to Q3 2022, reaching $327 million.
On November 4, Barron’s reported that MoffettNathanson senior managing director Lisa Ellis wrote to clients, “After a traumatic 2.5-year period, Block’s business is emerging from the pandemic stronger than ever.” With shares selling at just 2.3 times revenue, well below their five-year average of 8, Block is the greatest of the finest companies to purchase in the fintech industry.
Ticker Symbol: PYPL
PayPal has significantly diversified and extended its operations while being the market leader in online payment processing. In particular, the phenomenally popular Venmo peer-to-peer payment network has been responsible for an unparalleled increase in user base size. PayPal’s quarterly free cash flow has surpassed $1 billion, a profitability level that would please any corporation. This leaves it with substantial cash to spend on new prospects and preserve its market dominance.
In addition, PayPal has positioned itself as one of the industry’s leading digital payment service providers. It permits more than 429 million active accounts to transact globally in more than 200 countries. Recently, the firm has experienced a decrease in user growth. However, PayPal continues to work diligently to create novel methods of monetizing its vast user base.
This company’s juggernaut continues to safeguard users, increase product innovation, and enhance commercial solutions with the support of data-driven insights from its thousands of clients. PayPal will profit from robust holiday sales heading into the new year. Historically, it thrives throughout this season. Alongside the secular expansion of the digital payments sector, PayPal begins 2023 in excellent form. This is why it is currently one of the finest undervalued fintech stocks to purchase.
Ticker Symbol: TOST
Toast is the eleventh-largest holding of ARKF with a 3.9% weighting and the nineteenth-largest holding of FINX with a 1.7% weighting. The company’s stock is up 6.5% in 2023 and 33% in the last six months. In mid-November, the supplier of an end-to-end software-as-a-service platform for the restaurant industry released its Q3 results. Due to their exceptional performance, management increased its guidance for the full year.
Toast anticipates revenues of at least $2.69 billion, $72 million more than its previous forecast. The business anticipates an EBITDA loss in the range of $117 million to $127 million, a decrease from $140 million to $160 million. In addition, the company’s losses are going positively. On January 9, Benzinga highlighted comments from Mizuho analyst Dan Dolev. Toast is gaining market share at the expense of Square in the restaurant industry, which constitutes 30% of Block’s gross payment volume.
Analysts are increasingly bullish about its prospects. Twelve of the twenty analysts tracking TOST recommend either being overweight or buying. Their average price objective of $24.53 is 28% higher than the current market price.
According to Barron’s Needham analyst Mayank Tandon had extremely favorable things to say about Toast to clients around mid-November. Tandon told customers, “We believe TOST delivers essential solutions to restaurants that may help them control expenses and create incremental sales, which we feel is essential during economic stress.”
Nevertheless, TOST has the biggest risk of the three finest fintech companies on the market now and the largest potential profit. Therefore, remember this while allocating capital.
Ticker Symbol: INTU
Intuit is the fourth-largest holding of FINX with a weighting of 6.5%, while it is the nineteenth-largest holding of ARKF with a weighting of 1.6%. In 2023, its stock will be up almost 2%. The company’s most recognizable products include TurboTax, QuickBooks, Credit Karma, and Mailchimp. In February 2020, Intuit paid $7,1 billion for
Credit Karma is best known for offering free credit ratings. Significantly, credit Karma’s sales climbed by 2% to $425 million during its most recent fiscal quarter. The company’s sales increased by 29% to $2.6 billion, with Mailchimp contributing 13%. Credit Karma is the single blemish on Intuit’s otherwise stellar record. The revenue forecast for fiscal 2023 has shifted from double-digit growth to a double-digit decrease. 23 of 28 analysts covering the stock have a buy or overweight rating, with an average price target of $473. This is 19% over the current market price.
5. Visa (V)
Ticker Symbol: V
Visa leads the business, valued at trillions of dollars in the United States. Therefore, it is an important stock to keep an eye on while assessing discounted fintech stocks. Visa’s fourth-quarter earnings report reported a 22% rise in full-year revenue, bringing it to $29.3 billion. As Visa expands in 2023, consumers can anticipate dependable payment systems and services based on its proven track record.
In addition, Visa stockholders are aware that the corporation will look out for their best interests. Visa has rewarded its shareholders with enormous stock buybacks, reaching $11.5 billion in the most recent fiscal year alone, thanks to an outstanding $18 billion in free cash flow for fiscal 2022. Visa’s dedication to shareholder-friendly practices secures its position as one of the world’s largest and most reliable payment corporations, one that investors and customers can trust for decades.
6. SoFi Technologies
Ticker Symbol: SOFI
There are several viewpoints surrounding SoFi Technologies. Although most of the news is negative due to the Biden Administration’s student loan moratorium, we take solace in the fact that this problem will not persist forever. Additionally, it is not as though the business is losing consumers. For almost the past 12 months, revenue grew by over 60%. Possibly, the firm is not yet profitable. However, at around $5 per share, most negative news looks to be priced in.
Ticker Symbol: AFRM
In 2021 and 2022, as inflation skyrocketed, the buy now, pay later movement gained control of the economy, with Affirm at the forefront. In 2021, the business began cooperation with Amazon (NASDAQ: AMZN). This allowed Amazon to enter the market to buy now, pay later products. Moreover, Affirm is also affiliated with Walmart (NYSE: WMT), a corporation that continues to fight actively with Amazon.
However, the BNPL model is under scrutiny because financial professionals and consumer groups warn of the risks of extending payment periods, including overspending. Nonetheless, ahead of the holidays, many pundits predicted that the previous season would witness an increase in BNPL activity. This may be included in Affirm’s profits report for early February, depending on the outcome.
To conclude, the fintech business has great long-term potential, so it may be a good moment to seek reputable companies to keep for the long run. In light of this, the abovementioned seven fintech stocks might be excellent additions to your portfolio.
Fintech, a combination of finance and technology, refers to a company that utilizes technology to offer financial services to customers and businesses. Mobile banking, online lending platforms, cryptocurrency exchanges, and digital investing platforms are examples of fintech businesses.
In addition to Block Inc. and Bank of America, investors should consider other fintech stocks, such as Mastercard, Inc. (MA) and Paypal Holdings, Inc. (PYPL), to benefit from a growing market.
Fintech firms use technology to offer customers innovative and conveniently accessible financial products and services, which can promote competition in the financial industry as long as the firm grows in the market.
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