Fintech
Get Your Money From These 3 Fintech Stocks By 2025
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Fintech Stocks they were one of the most popular categories on the market in 2021. At the time, it seemed that the pandemic might push consumers to shift from traditional in-branch banking services to new digital alternatives.
However, fintech stocks have largely failed to meet these lofty expectations. While it’s one thing to create an engaging financial app, other areas like credit underwriting, deposit collection, and yield curve management can be more difficult for emerging fintech companies to master.
Even the big banks have reacted, investing billions in their own apps and digital banking services. At the same time, some fintech companies have collapsed. An example was Synapses, which implodedleaving thousands of depositors without immediate access to their funds.
While many fintech stocks have rallied in 2024, the positive momentum may be on loan. It’s time to sell these three fintech names before it’s too late.
David (DAVE)
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Many fintech stocks have emerged from the SPAC boom. For example, the mobile banking app David (NASDAQ:Dave) was founded with the aim of make managing finances easier.
Dave’s SPAC deal closed in late 2021 at a valuation that turned out to be unrealistic. Shares plummeted almost immediately and were ultimately down as much as 98% from the deal’s initial price. Since then, however, DAVE stock has skyrocketed tenfold from its lows.
To the company’s credit, it has narrowed its operating losses and appears on track to turn a profit this year. But that could come with a lot of risk.
Much of Dave’s profitability is tied to cash advance servicesThis form of high-risk lending can see substantial growth as the economy continues to collapse, but it can lead to substantial loan losses in a prolonged recession. DAVE stock has had a nice run, but growing economic headwinds will likely end the rally by 2025.
He states (AFRM)
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Unlike Dave, buy now pay later loan service To assert (NASDAQ:AFRCM) has not found its way to profitability.
In fact, Affirm recorded a shocking result $1.2 billion loss in fiscal 2023 on revenue of just $1.6 billion. For a financial services company, losing nearly a dollar for every dollar of revenue is not a great feat.
Fiscal 2024 will be a little less disastrous, but Affirm is still on track to lose about $800 million this year. Analysts see the company remaining deeply unprofitable at least until 2026, if not beyond.
And all this red ink comes during a growing economy where credit metrics have been relatively healthy. What will happen to Affirm’s loan portfolio if a substantial portion of its loans go from “buy now, pay later” to “buy now, never pay?” AFRM stock has rallied strongly over the past 12 months, but traders should get out of this fintech stock before the next recession hits.
SoFi Technologies (SOFI)
Source: SoFi.com
SoFi Technologies (NASDAQ:SOPHIE) is a financial services company that has made an increasingly important mark in the lending industry.
It started with student loans, but has expanded to a variety of other banking and credit products. However, student loans continue to be a headache for SoFi, with the Biden administration announcing another loan reduction plan in recent days. Other financiers are exit the student loan industry due to regulatory uncertainty, which portends the challenges SoFi may face in the coming years.
KBW recently cut off his prospects for SOFI stock, citing a troubling trend in net charge-offs (NCOs) on its outstanding loans. As with Affirm and Dave, SoFi faces significant risk if the economy goes south, particularly because its loan portfolio is already showing some signs of credit stress.
SoFi should be applauded for reaching profitability. This has fulfilled management’s initial promise. However, shares are still trading at a large premium to book value. This leaves the stock vulnerable to a major correction in the face of an economic slowdown.
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.
As of the date of publication, Ian Bezek did not have (either directly or indirectly) any position in the securities mentioned in this article. The views expressed in this article are those of the author, subject to InvestorPlace.com Publishing Guidelines.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million hedge fund based in New York City. He can be reached on Twitter at @irbezek.