Fintech stocks have faced challenges recently due to the prolonged high interest rate environment and macro uncertainty. Further, evolving regulations related to data privacy, payments, and cryptocurrencies have added to investor caution, creating short-term uncertainty in the sector.
Nonetheless, fintechs are transforming the financial services industry through innovations in digital payments, banking, lending, and more. As digital adoption continues to grow globally, the long-term prospects for fintech stocks remain promising. Furthermore, several fintech companies are expanding into emerging markets, unlocking significant growth opportunities in underpenetrated regions.
In this context, Payoneer (PAYO) and Block (SQ) stand out as attractive investment opportunities. Moreover, analysts are bullish on these stocks, as indicated by their "Strong Buy" consensus ratings. Let's delve into what makes these companies compelling options for investors and why Wall Street loves them.
Fintech Stock #1. Payoneer
Payoneer (PAYO) is a fintech company specializing in cross-border payment solutions, with a focus on small and medium-sized businesses (SMBs) in emerging markets. Payoneer offers a comprehensive financial stack covering accounts receivable (AR), accounts payable (AP), and working capital solutions.
The company’s growth trajectory is impressive. With approximately 1.98 million active customers, including 547,000 Ideal Customer Profiles (ICPs) — defined as customers with over $500 in monthly volume — Payoneer has experienced significant volume growth. Its volume growth accelerated in the past six consecutive quarters, and B2B volume growth accelerated for four consecutive quarters. Further, Payoneer has significantly increased its customer funds and the interest income it earns on those funds.
Payoneer’s product expansion strategy is key to its future growth. As it broadens its offerings to meet the evolving needs of SMBs, the move will increase customer retention and lifetime value. Payoneer is well-positioned to capitalize on secular trends, such as the shift toward digital commerce platforms and the rise in cross-border e-commerce and B2B transactions.
Besides growing organically, Payoneer could benefit from its accretive acquisitions. It recently announced the acquisition of Skuad, a company that helps SMBs automate hiring, cross-border payments, taxes, and more. The acquisition will enable Payoneer to cross-sell Skuad capabilities to its existing customer base. The move will increase its average revenue per user (ARPU) and enhance customer experience.
Payoneer is well-positioned to deliver solid revenue and adjusted EBITDA margins, driven by a large addressable market and take rate expansion. Further, it is focusing on acquiring larger ICPs, which will drive its ARPU and retention rate. Payoneer expects its revenue to grow at a mid-teens rate through 2026. Moreover, its top-line growth rate is expected to accelerate to 20%+ beyond 2026.
Wall Street is bullish about PAYO, reflected in the stock's "Strong Buy" consensus rating. Analysts’ average price target of $8.50 implies 18.5% upside potential from current levels.
Fintech Stock #2. Block
Block (SQ) is an attractive investment in the fintech space due to its ability to sustain growth at scale. Moreover, a large addressable market, its expanding consumer and seller base, and its focus on enhancing profitability support my optimism.
Block stands to benefit from solid growth opportunities across both its Square and Cash App businesses. For Square, Block is concentrating on refining its go-to-market strategy and increasing investments in its partnership ecosystem, which will help scale its distribution network. Additionally, Block is pursuing international partnerships and expanding its global footprint, a strategy that will accelerate the acquisition of new sellers on its platform and drive its top line.
Block is also prioritizing cross-selling banking and software services to its existing sellers and broadening its product offerings. This strategy is expected to boost both retention and margins. Further, the company maintains a positive dollar-based retention rate, supporting its recurring revenue streams.
In its Cash App business, Block is focused on expanding its financial services offerings. Moreover, the company is leveraging marketing to increase inflows per active user. Notably, the rising adoption of its products is driving its inflow per active user. With a higher inflow per active user and improved monetization rate, Block remains well-positioned to drive margins and profitability in the long term.
Overall, Block is poised for solid revenue and earnings growth, which is expected to support its share price. Wall Street remains optimistic, with a consensus rating of “Strong Buy.” Analysts have a price target of $85.32, indicating a potential 26.4% upside from current levels.
