2 Fast-Growing Fintech Stocks Worth Your Attention
Fintech stocks are among the hottest sectors to look out for in 2020. It is not just due to the secular rise in non-cash transactions. But it is also the change of habit from the Covid-19 pandemic where people may avoid dealing with cash for hygiene reasons. Payment solutions are changing the competitive landscape of e-commerce, online lending, money transfers, business payments, and online banking.
Shares of Square Inc. (SQ Stock Report) are up more than 6% on Tuesday and could see higher increases amid some signs of stabilization in the payments universe. Paypal (PYPL Stock Report), the venerable payment solutions provider, was ahead of its time when it started around the turn of this century. Shares of both Paypal and Square have doubled since the coronavirus-induced market sell-off in March.
Could Square Stock Be Poised For Big Gains In The Long Term?
In the fintech space, Square has been one of the most disruptive companies. Square generates revenue from fees charged for the use of its services. The company has proven resilient despite disruptions to its business by Covid-19. While the first-quarter numbers were mixed, many analysts believe that Square’s underlying long-term growth remains intact. The company saw improvement in volume growth rates since mid-April. Because of this metric, investors remain optimistic on SQ stock. If Square can continue to attract larger businesses in what’s already a consumption-driven economy, its impressive growth rate could accelerate even more.
Square’s Cash App To Power Through Covid-19
Square has seen momentum with its Cash App, which people can use to send payments to friends, receive direct deposits, and make online transfers with an associated debit card.
The consumer facing Cash App has proven to be the catalyst for growth over the past couple of years with gross profit skyrocketing 115% in the first quarter of 2020. With so much offerings from the Cash App, Square could easily see their revenue and profits improve over the coming few years. The Cash App was already gaining popularity prior to the pandemic, but the coronavirus outbreak likely drove more people to the app. In April, the company saw its highest ever monthly direct deposit volumes in April as people opted to get their stimulus payments delivered through the platform. With more people participating in the Square payment system, would Square stocks continue to rally?
Payment Processing Giant Paypal To Benefit From E-Commerce Expansion
More and more fintech companies are entering the space to get a slice of the cake. Despite the influx of players in the space, PayPal continues to lead. It still has the highest brand name recognition in digital payments and online merchant services. PayPal keeps leveling up its game to making strategic acquisitions that keep it ahead of the pack.
Venmo To Fuel PayPal’s Dominance In The Payments Industry
The company has added Venmo to its portfolio, which is rapidly becoming a go-to-source for teenagers and young adults to move money. Venmo’s total payment volume has grown by 47.61% from the first quarter of 2019. This growth is significantly higher than Paypal’s 18%. The increased adoption of Venmo from March this year could likely propel PYPL stock to a higher level. Separately, many small businesses find it hard to get a loan through traditional banks. PayPal aims to supplement the current gap by introducing PayPal Working Capital. The program bases approval on an algorithm that tracks a company’s revenue through PayPal. The whole borrowing process is simple, fast and transparent. This makes it easy for businesses to get small, short-term business loans without an elaborate application process.
The payment processing giant recorded $4.62 billion in revenue, just shy from analysts’ estimates of $4.72 billion. The adjusted earnings per share reported was $0.66, versus the $0.74 estimate. But PayPal did see higher total payment volume of $191 billion, up 18% year over year. Despite the earnings miss, the uptick in volume and new active users across the country could further consolidate its position as the leading digital payments provider. With the current valuation, is the price tag of PayPal stock justifiable? Comment and let us know below.