Fintech
2 Fintech stocks from millionaire producers
If done right, investing in fintech stocks can be very profitable. These businesses combine huge financial markets with the rapid growth rates of technology.
If you are looking high-flying fintech stocks capable of turning thousands into millions, the following two choices are for you.
This is one of the best ways to bet on Bitcoin growth
Bitcoin it was one of the best investments of all time. Since January 2009, the cryptocurrency has grown by more than 100,000,000%. A $1 investment would now be worth more than $1 million. Annualized, the price of Bitcoin has increased approximately 150% per year.
Of course, most of Bitcoin’s performance was accumulated during its first few years of trading. More recently, it has still seen incredible returns, but the pace has slowed. In the last three years, for example, Bitcoin has grown by 80%.
There may still be many long-term benefits to Bitcoin, but now that the cryptocurrency industry has reached a certain level of maturity, what is the best way to profit? The best solution could be a stock To block (NYSE: SQ).
You may know Block by its former name, Square. Initially the company presented itself primarily as a payment processing company. Last year, more than 4 million merchants used its Square architecture to accept payments from customers. This count includes dozens of small business owners accepting payments for the first time, but also established brands operating hundreds of stores.
In 2021, the company changed its name to Block to reflect its growing focus on blockchain technologies, including Bitcoin. For example, merchants can now accept payments in a variety of cryptocurrencies. Meanwhile, using the company’s peer-to-peer monetary platform, Cash App, millions of people can buy, sell and transfer cryptocurrencies at any time. The company now sells several billion dollars in Bitcoin to customers every quarter.
If you believe in Bitcoin for the long term, it’s hard not to be a fan of Block. It has two main payment platforms: Square for traditional merchants and Cash App for everyday consumers, with a front row seat to the rise of cryptocurrency usage. Right now, the stock is trading at a price-to-sales ratio of 1.75. That’s an attractive valuation for a company that grew revenue nearly 20% last quarter with a gross profit margin of 35%.
SQ PS ratio graph
This fintech stock is backed by billionaire investors including Warren Buffett
Block’s current market capitalization is just $40 billion, giving it plenty of room for long-term growth. The next stock on the list has a valuation of $540 billion. You might think that it doesn’t have as many benefits, and it’s true: it will be more difficult for Visa (NYSE: V) will quadruple the size of Block. But it’s still one of the best fintech stocks around, and there’s a good chance the company will outperform $1 trillion valuation score in the years to come.
The story continues
Visa is simply one of the best types of businesses to own. This is because it benefits from network effects. Network effects describe how a company’s product or service can increase in value as more people use it. Social media is a great example. As more and more people use a given social media platform, the platform becomes more valuable, attracting even more users, which offers even more value.
Visa’s situation is more or less the same. Merchants want to accept the payment methods that customers have available. Customers, meanwhile, want to use payment methods accepted by merchants. It is this dynamic that has created a natural consolidation in the credit and debit card markets. According to data compiled by Statista, Visa has an astonishing 61% market share for payment cards in the United States. Only three companies control the rest of the market.
This dominant market share has given Visa impressive pricing power on a large scale. This pricing power combined with an asset-light business model generates a gross profit margin of approximately 80%, with a return on equity of approximately 45%. These are incredible figures for a 540 billion dollar business.
Despite double-digit annual sales growth, Visa shares trade at just 30 times earnings. That might seem high until you compare it to the S&P 500, which trades at 27.5 times earnings. Paying a small premium for such a massive business seems like a no-brainer for long-term investors. Visa won’t turn thousands into millions as quickly as Block shares, but it’s a strong blue chip stock that can be added to any portfolio that has a decent chance of making millions over a ten-year holding period.
Should You Invest $1,000 in Block Right Now?
Before you buy shares in Block, consider this:
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Ryan Vanzo has positions in Bitcoin. The Motley Fool has positions and recommends Bitcoin, Block and Visa. The Motley Fool has a disclosure policy.
2 Fintech stocks from millionaire producers was originally published by The Motley Fool