Fintech
3 Fintech Stocks Riding the AI Wave
THE fintech stocks had their heyday in 2020-21, when they were thought to pose a serious threat to the market share of traditional financial institutions (think banks). As pandemic lockdowns hit and online shopping boomed in what was a “roaring start” to the 2020s, it seemed like the darlings of the fintech market could only go higher.
The momentum has finally fizzled out, and fintech stocks have been among the first to fall in the 2022 market sell-off. Undoubtedly, some of the more tech-savvy fintech disruptors have yet to recover. Not only that, but some, like Payment via PayPal (NASDAQ:PYPL), have shown little sign of life, with the stock now trading at prices even below its 2022 lows.
As the AI era moves forward, fintech companies may be able to muster enough enthusiasm to get a second wind of fresh air. In fact, many fintech companies have invested in various AI technologies. And some may yield returns, as AI reaps greater benefits further downstream. Let’s take a look at three of them.
PayPal (PYPL)
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PayPal held a tech-packed event earlier this year, highlighting a a handful of AI-driven innovations that management thought would “revolutionize commerce” and launch “the next chapter.” Management and the event’s presenters were thrilled. Investors were not, even after having more time to digest the finer details of the AI-driven event.
Will PayPal’s new AI-powered features make things easier for customers? Definitely. But are they game-changing? While I wasn’t blown away, I was intrigued, especially if PayPal could add to its arsenal of AI features.
Looking ahead, PayPal needs to continue to invest heavily in AI if PYPL stock is going to start to regain traction. The good news is that management is very serious about placing big bets on AI as the worlds of machine learning and fintech merge.
With Apple (NASDAQ:AAPL) which has recently attracted regulatory scrutiny over its payments business, perhaps PayPal will have an easier time claiming the fintech throne. Having an additional regulatory hurdle when faced with a major rival is always a good thing!
With a price-to-earnings (P/E) ratio of 15.1 times, the fintech stock is a bargain in more ways than one.
Robinhood Markets (HOOD)
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Robinhood Markets (NASDAQ:HOOD) is the platform of choice for many meme stock investors who have started Reddit (NASDAQ:RDDT) to talk about what Roaring Kitty has been up to. Robinhood may have a history of being a playground for speculators, to be sure.
In any case, I still believe that the platform has a significant advantage in the early stages of a bull market fueled by disruptive new technologies, especially artificial intelligence.
The brokerage firm reportedly acquired an artificial intelligence investment researcher Pluto. Such a deal could help Robinhood further differentiate itself from traditional brokerage firms. Indeed, Robinhood has long focused on using technology to open up investing to younger, often tech-savvy customers.
Pluto’s AI-powered investment analytics and insights probably won’t help its clients beat the market. However, I see the move as a boon to the trading business. And it might just attract users looking for a truly innovative brokerage platform.
All in all, HOOD stock is a great fintech company, flashier (think gold-plated credit cards) than the others.
American Express (AXP)
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American Express (London share:ASCENT) is a credit card company that, like Robinhood, has really gained traction among young people lately. The only thing flashier than a gold Robinhood credit card is the distinctive (black) Centurion card from American Express. Of course, such an invitation-only card is out of reach for most of these consumers.
That said, with growing interest in premium Platinum (and Gold) cards, which come with a fee, American Express has a unique opportunity to bring a wave of new technology to the next generation of fee-based card customers.
In fact, the closed-loop system is a unique advantage that American Express has over its rivals. It can allow American Express to leverage data to offer customers the features they want. As a company distributes artificial intelligence to mine data from its assets, it’s hard not to consider American Express as one of the most undervalued fintech stocks on the market.
Meanwhile, AXP shares look cheap (and buyable) at 19.7 times P/E ahead of Friday’s earnings report.
As of publication date, Joey Frenette held shares of American Express and Apple. The views expressed in this article are those of the author, subject to InvestorPlace.com guidelines Publishing Guidelines.
As of the date of publication, the responsible editor did not hold (either directly or indirectly) any position in the securities mentioned in this article.
Joey Frenette is an experienced investment writer specializing in technology and consumer stocks. A contributor to Motley Fool Canada, TipRanks, and Barchart, Joey excels at identifying mispriced stocks with long-term growth potential in a rapidly changing market.