3 Fintech stocks to buy while they’re down
Tech stocks have been under a lot of pressure from the market lately. Fear of future interest rate hikes and uncertainty about Russia and Ukraine prompted investors to exit positions in growth stocks and resort to safer assets. As a result, several businesses have seen their market value destroyed over the past six months. For many, any gains made during the pandemic have been wiped out.
The financial technology (fintech) industry, which refers to the combination of technology and finance, has been particularly hard hit of late. Cautious investors should interpret the negative sentiment as a buying opportunity as the market is growing at a blistering pace. The global fintech industry is expected to grow at a compound annual growth rate (CAGR) of 20% through 2030, to $700 billion. With that in mind, let’s take a look at three fintech stocks investors should consider adding to their long-term portfolios today.
PayPal (PYPL -3.77% ) is the group’s conservative investment. Shares of the fintech juggernaut have fallen around 60% over the past year, with no signs of a recovery anytime soon. PayPal’s total payment volume (POS) exceeded $1 trillion for the first time in 2021, making it the most accepted digital wallet in North America and Europe. The company, with 426 million active accounts, owns more than 50% of the global payment processing software industry, with Stripe in second with just 15%. In an increasingly crowded industry, PayPal has been able to establish a strong economic divide.
The company’s financial statements are also strong. In 2021, PayPal’s revenue grew 18% year-over-year and its earnings grew 19%, reaching $25.4 billion and $4.60 per share, respectively. Boasting $16.3 billion in cash and investments and a debt burden of just $9.8 billion, the company’s balance sheet is secure regardless of economic circumstances. And the cash keeps flowing — PayPal’s free cash flow has grown 38% this year and its operating cash flow 31%, reaching $1.6 billion and $1.8 billion, respectively. PayPal’s elite market positioning and distinguished track record make the company a leader in fintech today.
The next company on my radar is Block ( BECAUSE -4.68% ), formerly Square, which has fallen 51% over the past year. The company’s growth story so far has been remarkable. In 2021, Block’s revenue grew 86% year-over-year to $17.7 billion. Since Block sales are strongly affected by fluctuations in the price of Bitcoinmanagement encourages investors to focus more on gross profit.
Even so, gross profit ended the year at $4.4 billion, a 62% increase over 2020. Block’s Cash App ecosystem continues to be the catalyst for growth. Originally created to simplify peer-to-peer payments, Cash App has evolved into a full-service financial platform. Growing gross profit by 69% last year, Cash App now competes with businesses in debit and prepaid cards, stock trading, tax reporting, digital wallets and bitcoin exchanges, among other areas. It’s abundantly clear that Block is planning to disrupt the financial services industry – it will be interesting to see if the company is able to manifest its ambitious long-term goals.
The final company on my shortlist – and possibly the riskiest coin – is Sofi Technologies ( SOFI -3.18% ), which has fallen 58% over the past year. SoFi offers a range of financial products, including student and auto loan refinance, mortgages, personal loans, credit cards, investments, and mobile and desktop banking. The company is growing rapidly – adjusted sales increased 63% in 2021, to $1.01 billion. With 3.5 million members to close the year, translating into 87% growth from 2020, SoFi has made great strides in building its business and brand awareness.
SoFi is certainly a more speculative investment than the others on my list given that the company is likely years away from achieving profitability. It posted a loss of $1.00 per share in 2021 and expects to post a negative result again in 2022, so investors will have to remain patient with this company. In fact, analysts aren’t modeling positive net earnings until 2025. That’s a long way off, and it’s certainly possible that increased competition could hamper SoFi’s margins and prevent the company from reporting positive earnings in the future. . I don’t think investors should worry, though. SoFi participates in a massive secular growth market and has made notable progress year after year.
If you want to buy, buy now
These three fintech companies, all in different growth phases, could generate massive gains for long-term investors. It is not always easy to buy stocks when they are falling rapidly; however, these are generally optimal times to pull the trigger. The market has been acting illogically lately and savvy investors can take advantage of the situation. The fintech industry is here to stay, and as digital payments grow in popularity, these three companies are poised for a successful run in the years to come.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice 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.