After commanding premium valuations during the height of the COVID-19 pandemic, fintech stocks have fallen considerably due to the economic and geopolitical headwinds.
Fintech stocks have faced a fate similar to technology stocks as investors shifted from these high-growth and expensive names amid the rising interest rate environment. This is evident from the ARK Fintech Innovation ETF’s (ARKF) 50.3% decline year-to-date, compared to the S&P 500’s 13% loss.
Fintech companies have become extremely popular over the past few years as they have helped improve payments processing, insurance, lending, wealth management, etc. Companies in this space have also facilitated access to easy credit, money management, and simplicity in making payments.
Although the industry is poised to grow significantly in the long run, some fundamentally weak fintech stocks continue losing amid the current macroeconomic uncertainties. It could be wise to avoid fundamentally weak fintech stocks Block, Inc. (SQ), SoFi Technologies, Inc. (SOFI), and Forge Global Holdings, Inc. (FRGE).
Block, Inc. (SQ)
SQ is a technology company that creates tools that enable sellers to accept card payments and provide reporting, analytics, and next-day settlement. The company focuses on financial services. Also, its building block comprises Square, Cash App, Spiral, TIDAL, and TBD54566975.
SQ’s total net revenue declined 5.9% year-over-year to $4.40 billion for the second quarter ended June 30, 2022. The company’s operating loss came in at $213.77 million, compared to an operating income of $124.99 million in the year-ago period.
Also, its net loss came in at $208.01 million, compared to a net income of $204.02 million in the year-ago period. In addition, its loss per share came in at $0.36, compared to an EPS of $0.40 in the year-ago period.
Analysts expect SQ’s EPS for the quarter ending September 30, 2022, to decline 35.1% year-over-year to $0.24. Its revenue for fiscal 2022 is expected to decline 0.4% year-over-year to $17.58 billion. Over the past year, the stock has lost 68.8% to close the last trading session at $87.73.
SQ’s POWR Ratings are consistent with this bleak outlook. The stock has an overall D rating, equating to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an F grade for Stability and a D for Value. It is ranked #100 out of 108 stocks in the F-rated Financial Services (Enterprise) industry. Click here to see the other ratings of SQ for Growth, Momentum, Sentiment, and Quality.
SoFi Technologies, Inc. (SOFI)
SOFI is a digital financial services company. It operates through the lending, financial services, and technology platform segments. The company’s lending segment offers student loans and personal and home loans.
In contrast, the financial services segment provides cash management and investment services through SoFi Money, SoFi Invest, SoFi Credit Card, and SoFi Relay. Its technology platform segment offers the benefits of Galileo and Apex.
For the fiscal second quarter ended June 30, 2022, SOFI’s net loss declined 42% year-over-year to $95.83 million. The company’s loss per share declined 75% year-over-year to $0.12.
For the quarter ended September 30, 2022, SOFI’s EPS is expected to remain negative. Over the past nine months, the stock has lost 64.7% to close the last trading session at $7.96.
This weak outlook is reflected in SOFI's POWR Ratings. It has an overall rating of F, which translates to a Strong Sell in our proprietary rating system.
It has an F grade for Stability and Quality and a D grade for Growth, Value, and Sentiment. Within the Financial Services (Enterprise) industry, it is ranked #107. To see the other rating of SOFI for Momentum, click here.
Forge Global Holdings, Inc. (FRGE)
FRGE provides marketplace infrastructure, data services, and technology solutions for private market participants. It enables private company shareholders to trade private company shares with accredited investors.
FRGE’s total revenues declined 37.5% year-over-year to $20.02 million for the first quarter ended March 31, 2022. The company operating expenses increased 103.2% year-over-year to $58.64 million. Also, its operating loss came in at $38.75 million, compared to an operating income of $2.22 million.
Over the past three months, the stock has declined 81% to close the last trading session at $5.13.
FRGE's POWR Ratings reflect its bleak prospects. It has an overall F rating, equating to a Strong Sell in our rating system.
It has an F grade for Value and Quality and a D for Growth, Momentum, and Stability. Again, it is ranked #104 in the same industry. Click here to see the other rating of FRGE for Sentiment.
SQ shares rose $1.37 (+1.56%) in premarket trading Monday. Year-to-date, SQ has declined -45.68%, versus a -12.30% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
3 Fintech Stocks to Avoid in August 2022 StockNews.com
