Fintech
Top 3 Most Undervalued Fintech Stocks to Buy in July 2024
These undervalued fintech stocks with solid fundamentals are poised to capitalize on the sector’s rapid expansion
Underrated fintech stocks are ready to be seized by savvy investors.
The fintech market has proven to be resilient, dazzling everyone with innovation and expansion. Despite operating in unfavorable market conditions, characterized by slowdown in funding and valuation, the fintech space continues to hold up.
Furthermore, there is still a lot of growth that needs to be harnessed. With transformative technologies, including generative AI, remodeling services, and millions of people still unbanked, the industry is poised for rapid expansion. According to McKinsey, financial technology will outpace overall growth Banking sector growth has nearly tripled from 2022 to 2028. So, this represents an opportunity for investors to grab undervalued stocks in this dynamic sector.
However, when hunting for bargains, it is crucial to avoid falling knives. With that in mind, here are three undervalued fintech stocks that have been unfairly punished but offer enormous growth prospects. Their core operations are booming, boasting solid financial health.
Undervalued Fintech Stocks to Buy: SoFi Technologies (SOFI)
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SoFi Technologies (NASDAQ:SOPHIE) is a dynamic fintech growth stock that offers a range of lending, investing and personal finance products. Despite its strong operating results and superb financial position, SOFI has been a battleground stock. It exemplifies the rollercoaster nature of fintech stocks, swinging from an all-time high of $25.78 reached during the pandemic at a modest $6.57 currently. SOFI shares have lost 18.4% of their value in the last year alone.
Despite this volatility, SoFi’s operating performance remains excellent. In the first quarter (Q1) of 2024, the company boasted adjusted net income Net sales of $581 millionmarking a 26% increase on a year-over-year (YOY) basis. This consistent revenue growth is impressive, to say the least, especially considering that SoFi has maintained growth above 25% for the last twelve consecutive quarters.
Things are even more exciting in terms of the bottom line. SoFi’s adjusted EBITDA rose to $144 million in Q1, up a remarkable 91% YOY. Additionally, analysts expect it to finally break even this year, posting EPS of two cents, beating estimates by one cent.
Holding Company (NU)
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New participations (London share:NEW) is Brazil’s leading digital bank, effectively redefining financial services in the Latin American region. Since its founding in 2013, Nu has become the region’s largest digital bank, while maintaining a solid growth trajectory. Its comprehensive platform serves over 100 million users, offering everything from credit cards and personal loans to digital payments and brokerage accounts. Plus, it provides all of these services and more without the fees typically associated with traditional banks.
Financially, Nu Holdings is on an upward trajectory. Its most recent quarterly report saw net income jump to $378.8 million, more than doubling from $141.8 million a year earlier. Revenue also increased by 67% year-over-year to $2.7 billion in Q1, driven by an 83% activity rate among users. These figures indicate the bank’s operational efficiency, while underlining the strong appeal of its diverse financial offerings. It also enjoys a staggering growth in its customer base, adding 20.2 million new users YOY to reach 99.3 million at the end of the first quarter.
PayPal (PYPL)
Payment via PayPal (NASDAQ:PYPL) stands out as another underrated fintech gem.
The past few years have seen an unprecedented shift in shopping habits. From lockdown-induced online spending sprees to the current normalization of digital transactions, things have not been great for companies like PayPal. However, consumers are finally settling into their online shopping routines, which bodes well for PYPL stock.
On the operating front, the fintech pioneer continues to impress. It has comfortably exceeded revenue estimates for the last five consecutive quarters. The first quarter results showed a commendable 10% increase in sales to $7.7 billion, while total payment volume (TPV) increased 14%. Additionally, international TPV was particularly strong, up 17%, fueled by European and Asian gains. Financially, PayPal remains on solid ground, maintaining impressive YOY growth in net income and free cash flow margins of 14.3% and 21.4%, respectively.
Furthermore, with PYPL shares trading at just 1.93 times forward sales estimates, Wall Street gives it an encouraging “moderate buy” rating and expects a 27% increase compared to current prices.
As of the date of publication, Muslim Farooque 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.
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.
Muslim Farooque is a thoughtful investor and an optimist at heart. A lifelong gamer and technology enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a Bachelor of Applied Accounting from Oxford Brookes University.