Wall Street’s Favorite Fintech Stocks? 3 Names That Could Make You Filthy Rich
Fintech stocks saw a major surge during the Covid-19 pandemic when touchless payments and digital money transfers were in demand. Since then, fintech stocks have struggled, and the sector has been overlooked for hotter industries like AI or semiconductors. On top of that, fintech companies also see pretty stiff competition from legacy banks and payment brands.
Fintech is a fairly broad term that encompasses a wide range of businesses. It can include things like payment processing, stock and crypto trading, online or mobile banking and other financial services. As we move into a future where everything can be done from our smartphones, it’s time to consider fintech as a legitimate way of handling your financial business. Here are three of Wall Street’s favorite fintech stocks we love that are changing the world of finance forever.
Favorite Fintech Stocks: Block Inc (SQ)
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Block (NYSE:SQ) is an American fintech company that helps both merchants and consumers with online payments and transfers. In 2023, Block saw a total payment processing volume of more than $228 billion. As far as coverage goes, Yahoo Finance analysts have a one-year price target range of $40.00 to $110.00, with an average target of $89.05.
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This fintech brand is best known for the Square payment processor for merchants and the Cash App for mobile payments and transfers. Block has more than 50 million Cash App users, more than half of whom are between the ages of 18 and 34. With the Cash App, users can also buy and sell stocks, ETFs and Bitcoin (BTC-USD) directly from their smartphones. Block’s founder Jack Dorsey is also a staunch supporter of Bitcoin and Block holds more than 8,000 BTC on its balance sheet.
Despite being a high-growth company, Block trades at very reasonable valuations. The stock trades at about 2.2x sales and 25x forward earnings. Revenue has grown for seven consecutive quarters with a 5-year CAGR of 44%. At these prices and Block’s growth rate, it’s easy to see this stock multiplying over the next few years.
PayPal (PYPL)
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PayPal (NASDAQ:PYPL) is the global leader in online payments, with over 20 billion transactions in 2023. This fintech company was spun off from eBay (NASDAQ:EBAY) in 2015 and was originally founded by a group that included Elon Musk and Peter Thiel. With more than 430 million users across 200 countries, PayPal is the preferred method of international online money transfers.
PayPal also has a considerable army of analysts covering its stock. As per Yahoo Finance, the 38 analysts that cover PayPal have a one-year price target range of $56.00 to $120.00 and an average target of $69.98.
Shares of PYPL are down by about 15% since last March compared to the more than 30% returns of the benchmark S&P 500. One reason PayPal’s stock has dropped? The company transitioned to a new CEO in Sept. 2023.
If you think the stock’s poor performance has lowered its price multiple, you are correct. Despite having a 5-year revenue growth CAGR of 14%, PayPal trades at just 2.3x sales and 12.3x forward earnings. Shares have tumbled while the company has increased revenue in 37 consecutive quarters. PayPal is a free cash-flow generating machine whose stock has yet to see any life during this bull market.
Favorite Fintech Stocks: Robinhood (HOOD)
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Robinhood (NASDAQ:HOOD) is an American online and mobile stock and crypto brokerage that was founded in 2013. This fintech company is best known for the no-fee trading platform and gamification of options and crypto trading for younger traders.
A lot has changed since Robinhood was the face of the meme stock short squeezes in 2021. Robinhood has vastly improved the user experience and now offers premium subscription tiers. These allow users to access professional trading tools, and trade options, and earn a high interest rate on their cash positions. As of March 2024, Robinhood has over 23 million users with over $118 billion in Assets Under Custody.
Robinhood just posted a surprise profitable quarter and the stock has done well so far in 2024. But the story is just getting started and it can be argued that the stock is still trading below its true value. Currently, the stock trades at about 8.6x trailing sales but when incorporating its 5-year revenue CAGR of 46%, those multiples should come down sooner rather than later. HOOD is a stock that will benefit from both the equity and crypto bull markets over the next couple of years.
On the date of publication, Ian Hartana and Vayun Chugh did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chandler Capital is the work of Ian Hartana and Vayun Chugh. Ian Hartana and Vayun Chugh are both self-taught investors whose work has been featured in Seeking Alpha. Their research primarily revolves around GARP stocks with a long-term investment perspective encompassing diverse sectors such as technology, energy, and healthcare.
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