Prediction: These Could Be the Best-Performing Fintech Stocks Through 2030
It's been a tough past couple of years for fintech stocks. Rising interest set the stage for economic lethargy, while an inverted yield curve threatened an outright recession. Such a backdrop makes owning already risky financial technology names even riskier.
A funny thing happened on the road to inevitable doom, however -- the global economy didn't implode. Most regions' economies are doing reasonably well. The World Economic Forum is calling for a worldwide economic growth rate of 3.1% this year, in fact, before accelerating to a pace of 3.2% next year. The yield curve continues its trek back toward being un-inverted too; each day it makes this progress raises the odds of a so-called soft landing rather than a full-blown meltdown. That's bullish for most stocks, but it's particularly bullish for economically sensitive fintech names.
Here's a closer look at three fintech stocks that could lead the group's bullish charge all the way through 2030. That's how long recently rekindled economic growth could last, presuming the world's banking and political leaders don't stand in the way.
PayPal
There's no denying the original fintech name's very-highest-growth days are in the past. But PayPal (NASDAQ: PYPL) is hardly a has-been.
PayPal is of course an online payment and mobile wallet platform. It arguably created and defined what a digital payment service should be, in fact, and then became the name in this space to beat.
The thing is, rivals did eventually start creeping onto this company's turf, and they never really stopped. That's why PayPal shares performed so poorly beginning in late 2021 after a heroic run-up from their early 2020 low. Not only was the e-commerce boom stemming from the COVID-19 pandemic starting to cool off, but it was also a time when cryptocurrency-based payment platforms began capturing consumers' as well as investors' attention. Many investors feared the worst for PayPal.
It's now clear those fears were mostly unmerited. Last quarter's revenue was up 8% year over year, capping off full-year top-line growth of 8%. Although the total number of active PayPal users didn't grow, the number of times these users utilized PayPal's service to make a payment improved 14% on a year-over-year basis. The analyst community is calling for comparable sales growth this year and next, with earnings growth expected to roll in at around the same pace.
That's nowhere near the sort of growth PayPal was experiencing in its heyday. The entire online payment and mobile wallet market has matured, making growth tougher to come by.
What this company may lack in future growth potential, however, it more than makes up for in dominance of a market that's set to expand due to a combination of population growth, the increasing proliferation of web connectivity, and a growing willingness to use purely digital payment options (as opposed to payment cards). Capital One estimates PayPal still controls on the order of a market-leading 45% of the electronic payments market.
SoFi Technologies
Consumers' growing interest in digital financial services isn't just a boon for PayPal, however. It's impacting the entirety of the banking industry. Bank of America reports three-fourths of its customers now routinely use at least one of its digital banking tools, for instance, while roughly half of any product and service sales made to consumer banking customers last quarter happened online. In this same vein, the American Bankers Association says the most common way U.S. consumers now check their bank account balance is with a mobile app. Indeed, data gathered by JP Morgan Chase's Chase Bank indicates that 62% of consumers feel they couldn't live without their banking app, while nearly 80% of these people use their banking app at least once per week.
As was the case with shopping, the world's moving more and more of its banking business online.
Enter SoFi Technologies (NASDAQ: SOFI). Not only is it an online bank, it's only online -- there are no branches. This hasn't limited its offerings, though. Customers enjoy access to every option a consumer would expect to find available at a brick-and-mortar bank, including checking and savings accounts, loans, investments, credit cards, and even insurance.
And people are responding to this relatively new kind of banking. SoFi now boasts a little over 7.5 million customers, more than doubling its count from just a couple of years back. Indeed, the company's expanded its customer base in every single quarter going all the way back to the first quarter of 2020.
SoFi's not yet reliably profitable, but analysts expect it to report its first full-year profit in 2024 after swinging to its first quarterly profit in the final quarter of last year. That could prove catalytic for this stock that's been lethargic for the past couple of years.
MercadoLibre
Last but not least, add MercadoLibre (NASDAQ: MELI) to your list of fintech stocks that could outperform most of its peers between now and 2030.
Don't worry if you've never heard of it -- if you live in North America, you've no reason to. That's because the company strictly serves the Latin American market with its suite of fintech solutions. It's often called the Amazon of Latin America, in fact, although that description doesn't do it justice. MercadoLibre is just as akin to the aforementioned PayPal as well as to the online auction site eBay.
Although the internet and mobile phones have existed in South America for about as long as they have anywhere else, neither were as common there as they may have been in other parts of the world until recently. For perspective, Americas Market Intelligence says Latin America's e-commerce market expanded 36% in 2021 before accelerating to a growth pace of 39% in 2022, as infrastructure growth finally caught up with demand.
The thing is, there's still lots of room for more of this growth. Americas Market Intelligence is looking for 24% growth in Latin America's e-commerce market this year, with another 21% growth in the cards for next year.
Helping drive this acceleration is the past and present development of the region's mobile connectivity. Only 60% of the continent's residents owned a mobile device capable of connecting to the web as of 2020, according to research outfit GSMA. Even with the ongoing availability and adoption of mobile phones, though, only 67% of Latin America's population is expected to have regular access to mobile internet by the end of next year.
This of course bodes well for MercadoLibre's long-term potential ... not that investors will have to wait until 2030 for their patience to start paying off. Last year's revenue was up an impressive 37%, supporting even more earnings growth. This year's and next year's projected sales and profit growth are similarly impressive numbers, reflecting the maturation of the region's digital consumerism.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Bank of America, JPMorgan Chase, MercadoLibre, and PayPal. The Motley Fool recommends eBay and recommends the following options: short July 2024 $52.50 calls on eBay and short March 2024 $67.50 calls on PayPal. The Motley Fool has a disclosure policy.
Prediction: These Could Be the Best-Performing Fintech Stocks Through 2030 was originally published by The Motley Fool
