Do You Have These Top Fintech Stocks On Your Radar?
Financial stocks offer investors countless opportunities to gain exposure to what fuels the economy. Some argue that the financial sector is a part of the backbone of the global stock market, making it a highly interesting space to watch. No, I am not going to talk about bank stocks like Goldman Sachs (GS Stock Report) or Morgan Stanley (MS Stock Report). Because bank stocks have been here for many decades, most of you are probably already very familiar with them.
Today, let’s look at financial technology, or fintech. This industry experienced fantastic growth over the past decade and transformed the way people conduct many financial transactions. Investing in fintech stocks could be quite rewarding, considering the potential they have in the long-run.
Even after the growth of the cashless payments space in recent years, the majority of the payments around the world are still done in cash. For investors looking for fintech stocks to buy, it can be tough to identify those with the best growth potential. With that in mind, let’s take a look at a few stocks that might be worth adding to your portfolio.
Fintech Stocks To Buy (Or Avoid) #1 StoneCo
Shares of Warren Buffett-backed company StoneCo (STNE Stock Report) jumped on signs of rebounding payments activity. The Brazilian company is a leading provider of fintech solutions that empower merchants to conduct business seamlessly across multiple channels. Despite being a fintech provider, total payment volume (TPV) has taken a hit. Many of its clients were forced to suspend operations partially or completely from mid-March when the coronavirus hit the country.
StoneCo reported its first-quarter earnings estimates late Tuesday. Even though Covid-19 tempered the growth, the recorded TPV of US$7.03 billion was an increase of 42% year-over-year. The company reported better than expected total revenue of R$716.8 million, beating analysts estimates of R$669.7 million. However, the EPS reported were R$0.58, as compared to analysts estimates of R$0.72.
The long-term outlook for StoneCo in South America remains promising. This is because people in the region are increasingly opting to use digital and card-based payments instead of cash. Such conditions present substantial long-term tailwinds for the company. With the high growth we are seeing in international markets and payment processing services, would STNE stock be a good buy?
Fintech Stocks To Buy (Or Avoid) # Paypal Holdings
PayPal (PYPL Stock Report) has seen a surge in new accounts and payment volume. This came as more shopping is done online. The company is the undisputed leader in online payments, but it is so much more than that. For one thing, the payment giant plans to offer more in-store digital payment capabilities, integrate Honey into PayPal, and increase the utility of its p2p payments. To date, we have seen how Paypal was able to increase its massive user base at a rapid pace through acquisitions of complementary businesses.
Looking at the numbers, PayPal reported lower earnings and revenue in the first quarter due to the pandemic. The company reported EPS of 66 cents, which missed analysts’ estimates of 75 cents. The payment services company’s revenue of $4.62 billion also came in below Wall Street’s estimates of $4.74 billion.
“The diversity of our platform and customer base across products and geographies positions us well during this unprecedented time. Our free cash flow and strong balance sheet allow us to continue investing to serve the needs of our customers.”- John Rainey, PayPal’s CFO
With around 325 million active accounts in its platform, PayPal is still seeing a huge increase in online payments. This could be an investing opportunity in the future of banking. Like it or not, many consumers and businesses increasingly shift towards digital wallets rather than traditional checking accounts. With the digital payment business further growing in importance since the pandemic, we could see permanent upticks in use as we adjust to the ‘new normal’ economy. Nevertheless, at such a high valuation, do you think buying PYPL stock is justifiable?
Fintech Stocks To Buy (Or Avoid) #3 MercadoLibre
MercadoLibre (MELI Stock Report) is often referred to as the Amazon.com (AMZN Stock Report) of Latin America. The company has a massive e-commerce business that continues to grow at an impressive pace. MercadoLibre holds the lead position in its core market of Latin America. But hang on, aren’t we supposed to be talking about fintech? Let’s get to that.
MercadoLibre developed Mercado Pago, a payment platform that is most exciting from a fintech perspective. Reason being, many people do not even hold bank accounts in Latin America, which makes the payment platform so appealing. As such, it could be a fast growing segment for the company. This in effect also made the company a PayPal of Latin America. Since its inception, the payment system has grown into a full-fledged ecosystem that serves both online sites and physical stores. TPV in the quarter through Mercado Pago reached $8.1 billion, up 43.5% and 82% on a foreign-exchange neutral basis. Also, the number of payment transactions increased 102%, totalling 290.7 million transactions.
The Argentinian company reported a quarterly loss of $0.44 per share versus analysts’ estimates of $0.43. Net revenue grew to $652 million, up 38% compared to the previous year when translated into U.S. dollars. With the rapid growth of this ecommerce site and payment platform, does premium-priced MELI stock still deserve your attention?