3 Best Fintech Stocks You Can Buy Today
The market has had a lackluster start to 2022. Investors are worried about inflationary pressures, the imminent arrival of interest rate hikes and now a major geopolitical conflict disrupting the economic recovery even as the main winds opposites of the pandemic are beginning to dissipate.
In a market generally in a correction phase, growth stocks as a group were the hardest hit. Since the beginning of the year, the iShares S&P 500 Growth ETF lost 18% compared to S&P500down 12%. However, many growth stock names in the fintech space have been selling for even longer.
Three fintechs that are down 49% or more from their 52-week highs are Coinbase Global ( CHANGE -7.46% ), Assets received ( UPST -11.20% )and To block ( BECAUSE -6.38% ).
1. Coinbase Global
Investors interested in the cryptocurrency space would find Coinbase Global a solid choice. It provides the infrastructure for users to trade cryptocurrencies and build decentralized applications. By the end of 2021, its platform had 89 million retail customers, 11,000 institutional customers and 210,000 other users like developers and merchants. This large customer base is just one of the reasons why Coinbase holds 11.5% of the total cryptocurrency cash and crypto market capitalization on its platform.
Last year was stellar for the crypto platform, as the company achieved $7.8 billion in revenue, an impressive 514% jump from the previous year. Its net income growth was also impressive, with net income of $3.6 billion, up more than 1,000%.
Coinbase is poised to grow as the crypto economy grows. Indeed, it continuously adds new crypto assets to its platform while introducing new products and services. The past year has also seen strong growth in things like non-fungible tokens (NFTs), decentralized finance (DeFi), and decentralized apps. Coinbase earned $500 million in subscription and service revenue through staking, earning, and custody products.
The stock, however, took a beating in part due to uncertainties in Coinbase’s forecast. In its letter to shareholders for the fourth quarter, the company’s management spoke of “even more unknowns that make our business all the more difficult to predict”. This is due to the unpredictability of crypto asset prices and macroeconomic headwinds such as rising interest rates, inflation, and geopolitical instability.
Despite these headwinds, Coinbase seems like a great long-term investment. The company is a crucial player in the crypto space and continues to develop its platform as the crypto economy evolves. And with $7.1 billion in cash and cash equivalents versus long-term debt of $3.4 billion, the company has the flexibility to continue to invest in the business and position itself to remain a key player in space for years to come.
2. Assets received
Upstart Holdings leverages artificial intelligence (AI) to make lending decisions on consumer personal loans. The company wants to make loans accessible to everyone, especially those who are misclassified as less creditworthy by traditional credit scoring standards. Upstart connects borrowers on its website with its banking partners, taking referral fees and platform fees in return.
Fintech had a bumper year in 2021, with transaction volume up 241% to $11.7 billion. And thanks to its AI lending platform, nearly 70% of those loan approvals were fully automated. This propelled strong growth on the top and bottom lines. Revenue growth was 264%, while net income increased from $6 million to $135 million. Yet despite all of this, Upstart’s stock price is still down 72% from its 52-week high.
Investors have reason to be optimistic. Upstart has been profitable every quarter since its December 2020 IPO, and the company is growing in the auto lending space. The total addressable consumer loan market is $96 billion, while the auto loan market is larger, with an addressable market of $727 billion. After tripling its dealership footprint last year, Upstart expects to see auto financing volume of $1.5 billion in 2022.
Upstart is a solid fintech to buy at today’s prices. After trading at nearly 200 times forward earnings last year, it has now fallen to 51 times forward earnings. This valuation is still quite high, but given Upstart’s growth prospects, it may well be justified.
Block – known to most people better by its original name, Square – offers payment services and a commerce ecosystem that help small businesses manage and grow their businesses. It now offers 30 products and services in its two segments: Square and Cash App.
Cash App was initially just a tool that allowed people to send and receive money. Since then, it has grown to allow people to invest, manage and spend as well. Last year, Cash App processed $152.8 billion in gross payment volume (GPV) across 3 billion card payments from 526 million payment cards.
Block also had an outstanding performance in 2021. Its revenue increased by 86% to $17.6 billion. However, investors may be hesitant to get too excited about the uptick, as $5.4 billion of the $8.2 billion growth came from Bitcoin revenue – and Block will struggle to top that in 2022. However, its other businesses also showed solid growth during the year. Transaction-based revenue increased by $1.5 billion, or 45%, while subscription-based revenue increased by $1.2 billion, or a 76% increase.
Block also had a busy year on the acquisitions front. Among his purchases was Afterpay. This agreement, concluded on January 31, gives it a foothold in the “buy now, pay later” (BNPL) niche. The company will integrate Afterpay into its Cash App and Square platforms. From there, its Square product will integrate Afterpay into its online or in-person payment solutions. Then customers will be able to manage their refunds using the Cash app.
Investor concerns over Block’s rising spending are part of why its stock is trading nearly 60% below its 52-week high. The company expects spending to increase $180 million from the fourth quarter, primarily due to Afterpay integration costs. Not only that, but investors fear that Bitcoin-related revenue will slow.
Despite these concerns, Block has excellent long-term growth prospects. The company continues to grow and expand its offerings for customers. Although it will take some time to integrate these offers, there is still great stock to buy and hold for the long term.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.