Fintech
3 underdog Fintech stocks poised for a massive bull run
Unlocking the Potential of These Overlooked Fintech Innovators Before the Industry Rebounds
Fintech stocks have been languishing since the end of the post-Covid boom, and most fintech stocks have traded at record lows over the past two years. That said, I believe it makes sense to use this short-term weakness as an opportunity to buy some of the top fintech stocks for the long term.
I think most fintech stocks will recover once interest rate cuts are implemented and transaction volumes increase. Most tech companies have seen a significant recovery so far. I expect this recovery to extend to the fintech sector in due course, especially when the banking sector also has a full recovery and lenders are more comfortable partnering with fintech companies.
With that in mind, here are three fintech stocks to consider right now.
StoneCo (STNE)
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Stone Co (NASDAQ:STNE) provides payment processing solutions and financial services in Brazil. The company delivered solid results in the first quarter of 2024, with the company’s financial services segment performing well across all customer offerings. While growth in the company’s total payment volume, including PIX, has nearly matched volumes from the holiday shopping season, the launch of instant payments fulfilled a key demand from micro-merchant customers. I believe StoneCo is an undervalued fintech gem poised for an explosive bull run.
Despite trading sideways around $10-$20 per share for over two years, StoneCo’s underlying financials have steadily improved amid a challenging macroeconomic environment. The company’s earnings per capita also saw a significant recovery and revenues continued to grow.
As interest rates normalize and transaction volumes recover globally, I expect STNE stock will inevitably break out as powerful tailwinds converge. Brazil’s rapidly digitalizing economy presents enormous growth runway. And StoneCo’s structural renovation positions it to capitalize on a Expected compound annual growth rate (CAGR) of 30% or more of adjusted net profit through 2027.
While near-term headwinds have weighed on the stock, I view any weakness as an attractive buying opportunity for this misunderstood fintech leader. As StoneCo’s payments, banking and credit offerings gain traction, the market should soon recognize its immense long-term upside potential.
Remitly Global (RELY)
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Put back (NASDAQ:RELY) provides cross-border remittance services to migrants around the world. Despite significant headwinds that have pushed the stock down 34% over the past year, I believe RELY stock is an attractive long-term buy.
Yes, the company’s marketing expenses are high and profitability is elusive for now. However, Remitly’s strong first quarter results demonstrate that its value proposition is resonating with consumers. Revenue rose 32% to $269 millionalmost in line with estimates, while earnings per share of 8 cents far exceeded expectations of 3 cents.
Analysts expect an increase in revenues from $1.24 billion in 2024 to $2.13 billion in 2027. More importantly, the company’s profits are expected to skyrocket from 41 cents per share to $1.70 over that time frame as margins expand.
At just 29 times forward earnings and 1.9 times sales, Remitly’s growth potential seems drastically undervalued. I expect increased migration flows to Western countries will bolster growth as more expats send money home. The mega trend of remittances still has room to develop. Analysts are also very optimistic about this name and I think they are onto something.
PayPal (PYPL)
PayPal (NASDAQ:PYPL) is a leading digital payments platform that connects merchants and consumers around the world. I believe PayPal stock is unfairly trading at half its pre-COVID levels, despite delivering solid first-quarter results that point to brighter days ahead for this fintech giant. The company has delivered Revenue growth of 10% at constant currency on an impressive total payment volume of $404 billion. This was driven by 4% dollar growth in transaction margin, thanks to targeted management actions. While PayPal is still in the early stages of a multi-year transformation, the first quarter provided encouraging signs that its efforts to drive profitable growth are paying off.
Active account growth is still an issue. But even then, I believe PayPal should have a much higher rating, as it has proven it can squeeze more and more out of its existing user base. Its headline financials have been very strong and many metrics have seen a full rebound.
Notably, PayPal bought back $5 billion of its undervalued shares last year and is executing another $5 billion buyback this year. The company also reached an inflection point in accounts receivable and revenue growth stabilized around 8%. I believe the market is myopically mispricing this household name.
As of the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any position in the securities mentioned in this article. The views expressed in this article are those of the writer, subject to InvestorPlace.com Guidelines for publication.
Omor Ibne Ehsan is a writer at InvestorPlace. He is a self-taught investor with a focus on growth and cyclical stocks that have strong fundamentals, value and long-term potential. He also has an interest in high-risk, high-return investments such as cryptocurrencies and penny stocks. You can follow it LinkedIn.