/cmdtyView%20Stock%20Photo%202.png)
The fintech industry in 2023 has been a wild ride - thanks to the regional bank crisis that kicked off the year, followed by stubbornly hot inflation stats, interest rates at multi-decade highs, and plenty of back-and-forth about student loan repayments.
Despite the heightened volatility, investor interest in the fintech space remains high - and for good reason. We're talking big bucks here, with a whopping $174 billion market up for grabs - and the increasing adoption of artificial intelligence (AI) and machine learning is only raising the bar in terms of what fintech companies can do.
SoFi Technologies (SOFI) might be the best-known name of the new breed of fintech companies (SoFi Stadium, anyone?) - but the stock isn't exactly highly regarded on Wall Street, despite the shares gaining 68% year-to-date.
Chalk it up to valuation concerns or superstitions over the stadium curse, but SoFi has an average rating of “hold” from 16 analysts, with only 5 “buy” ratings from this unenthusiastic group - compared to 7 “holds” and 4 “sell” or worse ratings.
Instead, for investors looking to add exposure to fintech stocks on this latest dip in the stock market, here's a look at three buy-rated fintech stocks that analysts have rated much higher than SoFi.
Block: A Leader in the Digital Payment Industry
Block (SQ), formerly known as Square, is a prominent player in the world of financial services and digital payments, founded by Jack Dorsey (also the brains behind Twitter) and Jim McKelvey. They offer a wide array of financial solutions, from payment processing to point-of-sale systems, catering to both businesses and individuals.
It's been a wild ride for Block. Despite the tech-heavy Nasdaq Composite ($NASX) rising 27% year-to-date, Block's shares have taken a hit, dropping by about 28% this year. This drop comes on the heels of a 61% decline in 2022.
So, why the decline? Well, along with the broader economic concerns mentioned previously, part of it has to do with a shift away from growth stocks, which has hit many companies in this industry. On top of that, Block's gross profit margin has been shrinking, making some folks wonder if the company can grow fast enough to justify its market value.
Notably, in its Q2 2023 update, Block (SQ) upped its outlook for full-year adjusted EBITDA to around $1.50 billion, up from the previous forecast of $1.36 billion.
According to Bank of America analyst Jason Kupferberg, the stock's latest sell-off might be a bit overdone. He thinks the shares are undervalued considering their fundamentals.
Taking recommendations from 34 analysts into account, 21 call SQ a “strong buy,” 2 lean toward a “moderate buy,” and 11 suggest “hold.” The mean target price for the stock is $79.90, indicating 79% potential upside from the current price.
PayPal: A Pioneer in Online Payments
PayPal (PYPL), the digital payments giant, provides a wide range of financial services, including online payments and money transfers, serving both individuals and businesses.
So, 2023 has been quite a rollercoaster for PayPal's stock, with the shares off 21% year-to-date amid slower e-commerce spending and increased competition in digital payments. In Q2 2023, PayPal processed $376.5 billion in total payment volume from merchant customers, which was slightly below what analysts expected.
Strategically, however, PayPal just announced an exclusive multi-year partnership with KKR, a global investment firm, on June 20. Under the terms of the agreement, KKR's private credit funds and accounts will buy up to €40 billion ($44.25 billion) of buy now, pay later (BNPL) loan receivables from PayPal in several European countries.
This deal enables PayPal to keep up with the growing demand for PayPal Pay Later in Europe while also maintaining funds for other strategic endeavors. This partnership is expected to strengthen their position in the growing BNPL market and help them gain more market share.
Out of 34 analyst opinions, 19 are shouting "strong buy," 1 is going for a "moderate buy," and 14 are in favor of "hold." The mean target price for PayPal's stock is a promising $86.47, which indicates 54% potential upside from current levels.
Fiserv: A Powerhouse in Financial Services Technology
Fiserv Inc. (FI) is a leading provider of financial services technology, offering various products and services such as core banking, merchant services, digital solutions, and Clover. They serve thousands of financial institutions, merchants, and consumers across the world, enabling them to manage money and payments efficiently and securely.
With a substantial market cap of $70.09 billion and an enterprise value of $90.77 billion, this company boasts some impressive fundamentals. FI shares are up about 12% year-to-date - not quite keeping pace with the broader market's gain, but still faring better than some of its fintech rivals in 2023.
Fiserv has an impressive track record of sales, raking in $17.7 billion over the past year, with $2.5 billion in net income. The last quarter was mixed, featuring $4.8 billion in sales and $683 million in net income. The next earnings report is set to drop on Oct. 24, with estimates calling for earnings of $1.94 per share.
Out of 26 analysts tracking FI, 14 have a “strong buy” recommendation, 3 favor a “moderate buy,” and 9 suggest “hold.”
The mean target price for Fiserv's stock is an attractive $142.67, signifying 25% upside potential from current levels.
