The rise of fintech companies has caused a radical shift in how we make payments, borrow money, insure, and manage wealth. However, 2022 has been a challenging year for fintech companies as venture capitalists have tamped down on their investment in the sector.
In the third quarter of fiscal 2022, global fintech funding fell 38% quarter-over-quarter to hit $12.90 billion — matching fourth-quarter fiscal 2020 levels.
The prevailing high inflation and aggressive interest rate hikes by the Fed have set a discouraging tone for investors. Fintech stocks are incredibly volatile as they are sensitive to interest rates. Investors’ declining interest in fintech stocks is evident from the ARK Fintech Innovation ETF’s (ARKF) 68.8% decline year-to-date.
Amid this backdrop, fundamentally weak fintech stocks are expected to remain under pressure in the upcoming months. Therefore, Block, Inc. (SQ), Marathon Digital Holdings, Inc. (MARA), and Paymentus Holdings, Inc. (PAY) could best be avoided now.
Block, Inc. (SQ)
SQ creates tools enabling sellers to accept card payments and provides reporting, analytics, and next-day settlement. It offers various hardware products, software products, and a developer platform.
SQ’s total liabilities increased 7.5% to $12.59 billion for the third quarter ended September 30, 2022, compared to $11.71 billion for the fiscal year ended December 31, 2021. The company’s total operating expenses widened 45.5% year-over-year to $1.61 billion. Its net loss attributable to common stockholders came in at $14.71 million, compared to its net income of 84K a year ago.
Moreover, its net loss per share came in at $0.02. Its net cash provided by operating activities for nine months ended September 30, 2022, declined 80% year-over-year to $130.53 million.
SQ’s EPS for the quarter ending December 31, 2022, is expected to decline 0.1% year-over-year to $0.27. Over the past year, SQ has fallen 70.3% to close the last trading session at $67.40.
SQ’s POWR Ratings reflect its weak prospects. The stock has an overall rating of D, equating to a Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the F-rated Financial Services (Enterprise) industry, it is ranked #79 out of 106 stocks. The company has a D grade for Momentum, Stability, and Quality.
Click here to see the additional ratings of SQ for Growth, Value, and Sentiment.
Marathon Digital Holdings, Inc. (MARA)
Marathon Digital Holdings, Inc. operates as a digital asset technology company that mines cryptocurrencies with a focus on the blockchain ecosystem and the generation of digital assets in the United States.
For the fiscal third quarter ended September 30, 2022, MARA’s revenues declined 75.4% year-over-year to $12.69 million. Its net loss widened 240.2% year-over-year to $75.42 million. Its adjusted EBITDA loss came in at $8.70 million, compared to $78.78 million. In addition, its net loss per share widened 195.5% year-over-year to $0.65.
MARA’s EPS for the quarter ending December 31, 2022, is expected to decline 240% year-over-year to $0.14. Its revenue is expected to decrease 19.8% year-over-year to $48.37 million. It has failed to surpass the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has fallen 84.6% to close the last trading session at $9.98.
MARA’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall rating of F, which translates to a Strong Sell in our proprietary rating system. It has an F grade for Growth, Value, Stability, Sentiment, and Quality and a D for Momentum.
Click here to see all the ratings of MARA.
Paymentus Holdings, Inc. (PAY)
PAY provides cloud-based bill payment technology and solutions. The company offers electronic bill presentment and payment services, enterprise customer communication, and self-service revenue management to billers. The company serves utility, financial services, insurance, government, telecommunication, and healthcare industries.
For the fiscal third quarter ended September 30, 2022, PAY’s net cash used in operating activities came in at $1.95 million, compared to net cash provided by operating activities of $6.60 million.
The company’s total liabilities increased 58% year-over-year to $137.19 million, compared to $86.81 million for the fiscal year ended December 31, 2021. Additionally, its net loss attributable to common stock widened 274.6% to $737K. Its operating expenses increased 29.1% year-over-year to $38.77 million.
Analysts expect PAY’s EPS to decline 50% year-over-year to $0.01. Over the past year, the stock has fallen 61.5% to close the last trading session at $11.68.
PAY’s POWR Ratings reflect its grim outlook. The stock has an overall rating of D, translating to a Sell in our proprietary rating system. It is ranked #82 in the Financial Services (Enterprise) industry. In addition, it has a D grade for Momentum, Stability, and Quality.
To see the other ratings of PAY for Growth, Value, and Sentiment, click here.
SQ shares were trading at $71.54 per share on Friday afternoon, up $4.14 (+6.14%). Year-to-date, SQ has declined -55.71%, versus a -15.14% 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 Into the End of 2022 StockNews.com
