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Upstart (UPST) is a fintech company that has taken investors on a roller coaster ride since its shares went public in December 2020. Upstart stock was priced at $20 in its initial public offering (IPO), and touched an all-time high of $390 in October 2021.
Currently, UPST is down 93% from record highs, valuing it a market cap of $2.17 billion.
Upstart operates a cloud-based, artificial intelligence (AI)-powered lending platform that aggregates consumer demand for loans and connects it to a bank and credit union partner network.
Higher interest rates have led to a tepid lending environment in the last 18 months, pressuring demand for Upstart’s lending platform. While its sales surged from $162.8 million in 2019 to $837 million in 2022, the company is forecast to experience a revenue decline of almost 40% in 2023. Moreover, analysts expect Upstart to swing to a loss of $0.58 per share in 2023, compared to earnings of $0.21 per share in 2022.
Although UPST has managed an eye-catching year-to-date gain of 93%, Wall Street remains understandably wary. Out of the 14 analysts covering Upstart stock, only one recommends “strong buy,” five recommend “hold,” one recommends “moderate sell,” and seven recommend “strong sell,” for an average rating of “moderate sell.” Plus, the mean target price for UPST is $19.61, 23% below the current trading price.
For investors looking to add exposure to the space as interest rates begin to ease, here are three fintech stocks Wall Street likes better than Upstart.
PayPal Stock
Valued at $60.95 billion by market cap, PayPal (PYPL) stock is down about 82% from all-time highs.
In Q3 of 2023, PayPal’s sales were up 8% year over year at $7.4 billion, while adjusted earnings grew by 20% to $1.30 per share. The total payment volume processed by the PayPal platform rose by 15% to $388 billion in the September quarter.
A key driver for PayPal’s top line is the expansion of its user base. The company ended Q3 with 428 million active accounts, a decline of 1% compared to the year-ago period. However, average account transactions rose to 57 in the last 12 months, an increase of 13% from the year-ago period.
Priced at 11.4 times forward earnings, PYPL is quite cheap.
Out of the 35 analysts covering PYPL, 18 recommend “strong buy,” one recommends “moderate buy” and 16 recommend “hold.” The average target price for PayPal stock is $77.34, 36% above the current trading price.
Block Stock
Block (SQ), formerly known as Square, has two primary business segments. It initially began as a fintech company offering payment processing solutions to small and medium-sized businesses. This segment generated 47% of total gross profits in Q3 and processed $55.7 billion in gross payment volume, an increase of 11% year over year.
Its second business segment is Cash App, a mobile application that allows users to send or receive payments, invest in the stock market, and even purchase cryptocurrencies. With 55 million monthly active users, Cash App increased gross profits by 27% in Q3.
Valued at 19x forward earnings, SQ is attractively priced.
Out of the 35 analysts covering Block stock, 22 recommend “strong buy,” two recommend “moderate buy,” and 11 recommend “hold.” The average target price for SQ is $73.17, 24% above the current trading price.
Fiserv Stock
The final stock on my list is Fiserv (FI), which has already returned over 350% to shareholders in the past decade.
In Q3 of 2023, Fiserv reported revenue of $4.87 billion with earnings of $1.96 per share. The results topped Wall Street's forecast for revenue of $4.6 billion with earnings of $1.93 per share. While the company increased sales by 7.7% year over year, its earnings grew by 20% compared to the year-ago period.
Despite a challenging macro environment, Fiserv’s free cash flow surged by 29% to $2.72 billion in the first nine months of 2023. The company now expects 2023 sales to grow by 11% year over year, with adjusted earnings forecast at $7.50 per share. So, FI is priced at 16.5x forward earnings.
Out of the 27 analysts covering Fiserv stock, 15 recommend “strong buy,” three recommend “moderate buy,” and nine recommend “hold.” The average target price for FI is $142.23, more than 15% above the current trading price.
