Fintech
The best of Fintech: 7 stocks to buy for the future of finance
The fintech sector is full of promising stocks that challenge the way we look at finance. Some of these companies offer more competitive rates and conditions than traditional banks. Others are riding financial trends toward higher returns for their shareholders.
Digital banks are becoming more prevalent, which can lead to significant appreciation in the long run. While investors can choose from many fintech stocksthese top picks have a lot to offer.
American Express (AXP)
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American Express (NYSE:AXP) continues to rise after an impressive First quarter earnings report. Revenue increased 11% year-over-year, while net income increased 34% year-over-year in the quarter. The fintech company has also shown it can appeal to younger consumers. Over 60% of new consumer account acquisitions were among Millennials and Gen Z consumers.
The stock is up 26% year to date and has gained 107% over the past five years. It trades at a P/E ratio of 19.5 and offers a yield of 1.18%. American Express has done a good job of increasing its dividend over time. The company recently announced a Dividend increase by 17%.. American Express has maintained a annualized dividend growth rate of 10.51% for the past decade, so the recent excursion is a pleasant surprise.
American Express should continue to generate returns as people use their credit and debit cards to purchase products and services. The fintech company makes a small percentage of each transaction.
Robinhood (HOOD)
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Robin Hood (NASDAQ:HOOD) is innovating in the fintech sector. The company has several upcoming products and releases that challenge how financial companies reward their customers.
Robinhood has forced many brokerage firms to remove stock trading commissions and Robinhood Gold it will also bring many changes. This membership comes with 5% interest on uninvited cash, zero interest on the first $1,000 of margin borrowed, and a 3% IRA match on eligible contributions. The Robinhood Gold Card also offers unlimited 3% cashback on every purchase with no annual fees. No other credit card offers this offer.
You can also earn 1% more on every deposit. Robinhood has an attractive range of services and benefits that allow it to surpass what other banks offer. Other financial institutions will have to offer similar incentives to keep up. Robinhood stock has generated solid returns recently. It is up 67% year to date.
Nu Holdings (NU)
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Nu Holdings (NYSE:NU) is a Brazilian digital bank that has grown 47% year to date thanks to rising net profit margins and strong demand. The stock has a P/E ratio of 46, above average banking securitiesbut Nu Holdings makes up for it with strong financials.
Nu Holdings has closed the first quarter of 2024 with 99.3 million customers. This is a 26% year-over-year improvement. Financial stocks also showed impressive growth rates. Revenue increased 69% year-over-year, while net income increased 167% year-over-year.
The digital bank offers many financial products: credit cards, bank accounts, investment portfolios, loans and insurance policies. The bank has 17.0 million active investment clients, an improvement of 85% year-on-year. Active customers were 82.6 million with an increase of 27% on an annual basis. As customers become more active across multiple offerings, Nu Holdings should continue to reward long-term investors. Nu Holdings is currently classified as “Strong buy” with an expected increase of 12% from current levels.
Visa (V)
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Visa (NYSE:V) is a leader in the credit and debit card industry with a market capitalization of more than $500 billion. The fintech company has a realistic chance of becoming a trillion-dollar company by 2030.
Visa makes money from every credit and debit card transaction. The business model has resulted in solid financial growth. Revenue increased 10% year over year, while GAAP earnings per share increased 12% year over year. Visa also reported payment volume growth of 8% year-over-year, with cross-border volume increasing 16% year-over-year.
The company performed well on the stock market. The stock is up 5% year to date and has gained 68% over the past five years. Visa trades at a P/E ratio of 33 and has a yield of 0.77%. The company recently increased the quarterly dividend from $0.45 per share to $0.52 per share. This is an increase of 15.6% year-on-year. The company also has a annualized growth rate of dividends by 15.93% in the last five years.
SoFi (SOFI)
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SoFi (NYSE:SOFI) has gained momentum as more and more people have become open to banking via digital platforms. SoFi closed the first quarter with 8.1 million members. The company grew its member base by 44% year over year, including an additional 622,000 in the first quarter.
The rapid acceleration in membership has also resulted in improved financials. Revenue increased 37% year over year to reach $645.0 million, while net income was $88.0 million. For comparison, SoFi posted a net loss of $34.4 million in the same period last year. SoFi is attracting consumers with high credit scores. Among direct deposit accounts opened in the first quarter, the average FICO score was 744.
SoFi has had many ups and downs as a stock. It is down 28% year to date, while showing a 1-year gain of 15%. Rapidly expanding profit margins, a robust product catalog and millions of members mean the stock may be on the verge of a sustained rally.
PayPal (PYPL)
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PayPal (NASDAQ:PYPL) offers growth at a reasonable price after many investors gave up on the stock. It trades at just a P/E ratio of 15.5 after falling about 80% from its all-time high. The shares have been stable since the beginning of the year.
The company reported good financials to start 2024. First quarter revenue increased 9% year-over-year, while GAAP EPS increased 18% year-over-year. PayPal expects revenue to grow 6.5% to 7%. GAAP EPS is expected to decline from $3.84 in fiscal 2023 to $3.65 in fiscal 2024, marking a decline of 5% year-over-year.
PayPal has more than 400 million users and we recently took advantage of a new opportunity to increase annual revenue per user. PayPal is coming advertising activity it can increase profit margins and bring more attention to the business.
PayPal will use customer data to deliver targeted advertising campaigns in a move that can boost its finances for several years. PayPal is valued as if the advertising segment doesn’t happen, but if ads start to take off, PayPal stock will merit a higher valuation.
JP Morgan (JPM)
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JP Morgan (NYSE:JPM) is one of the oldest and most established financial institutions. It was founded in 1871 and has outperformed most large banks. The stock is up 16% year to date and has gained 88% over the past five years. The stock trades at a P/E ratio of 12 and has a yield of 2.30%.
The financial institution achieved a return on equity of 17% in first quarter and also announced a 10% dividend increase. JP Morgan also repurchased $2.0 billion worth of common stock. Net revenues totaled $41.9 billion, 9% more than the same period last year. The company’s net income of $13.4 billion is 6% higher than in the same period last year.
JP Morgan is positioned to thrive in a time of high interest rates. Not all banks will do well, and smaller ones may have to close. If that happens, more consumers will invest their money in trusted companies like JP Morgan that have weathered more than 100 years of economic cycles and market volatility.
As of the date of publication, Marc Guberti holds a long position in SOFI. The opinions expressed in this article are those of the writer, without prejudice to InvestorPlace.com Guidelines for publication.
Marc Guberti is a freelance financial writer at InvestorPlace.com who hosts the Breakthrough Success podcast. He has contributed to several publications, including US News & World Report, Benzinga and Joy Wallet.