Fintech stocks struggled in 2023, though Square parent Block rallied late in the year. Deutsche Bank is bullish on fintech stocks in 2024, including SQ stock, Marqeta and Bill.com.
However, Goldman Sachs on Tuesday took Shift4 Payments off its "conviction list" of highly preferred stocks.
While payment stocks underperformed last year, they did better in November and December amid consensus views for a "soft landing" for the U.S. economy. That outlook expects a mild recession or better.
'Soft Landing' Scenario Boosts Fintech Stocks
"In this environment, we expect investors will favor fintechs that can prove they are not losing share to upstarts and that have strong recurring business models with high earnings and free cash flow generation through the duration of a recession," Deutsche Bank analyst Bryan Keane said in a report.
"However, we believe that as the macro situation begins to improve, investor attention could return more toward high-beta growth stocks like MQ, SQ and BILL that are more levered to a broader-based economic recovery," he added.
On the stock market today, SQ stock fell 4.6% to 73.78 amid a broad sell-off. MQ stock retreated 3.4% to 6.75. BILL stock dipped 5.5% to near 77.
In 2023, SQ stock gained 23% while MQ stock rose 13%. BILL stock fell 27%.
Meanwhile, shares in Shift4 jumped 33% in 2023. But FOUR stock dipped 2.4% to 72.57 after being removed from Goldman Sachs' conviction list.
Rising interest rates and fears over a U.S. recession pressured fintech stocks for much of 2023. But the Federal Reserve has signaled that its policy tightening campaign is over. Wall Street analysts project potential interest-rate cuts in 2024.
The biggest IBD group of fintech stocks ranks only No. 174 out of 197 industry groups tracked.
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