Fintech
3 Underdog Fintech Stocks Set for a Massive Bull Run
Unlock the potential of these overlooked fintech innovators before the industry recovers
Fintech stocks have remained dormant since the end of the post-Covid boom, and most fintech names have been trading at two-year balance levels. That said, I believe it makes sense to use this short-term weakness as an opportunity to buy some of the best fintech stocks for the long term.
I think most fintech stocks will recover once interest rate cuts are implemented and transaction volumes increase. Most tech companies have seen a significant recovery so far. I expect this recovery to extend to the fintech sector in due course, especially when the banking sector also has a full recovery and lenders are more comfortable partnering with fintech companies.
With that in mind, here are three fintech stocks to consider right now.
StoneCo (STNE)
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StoneCo (NASDAQ:STNE) provides payment processing solutions and financial services in Brazil. The company delivered solid results in the first quarter of 2024, with the company’s financial services segment performing well across all customer offerings. While growth in the company’s total payment volume, including PIX, has nearly matched holiday shopping season volumes, the launch of instant payments fulfilled a key demand from micro-merchant customers. I believe StoneCo is an undervalued fintech gem poised for an explosive surge.
Despite trading sideways around $10-$20 per share for over two years, StoneCo’s underlying financials have steadily improved amid challenging macroeconomic conditions. The company’s earnings per share have also rebounded significantly, and revenue has continued to grow.
As interest rates normalize and transaction volumes recover globally, I expect STNE stock will inevitably break out as powerful tailwinds converge. Brazil’s rapidly digitalizing economy presents enormous growth runway. And StoneCo’s structural renovation positions it to capitalize on a expected compound annual growth rate (CAGR) of 30%+ in adjusted net profit through 2027.
While short-term headwinds have weighed on the stock, I view any weakness as an attractive buying opportunity for this misunderstood fintech leader. As StoneCo’s payments, banking, and credit offerings gain traction, the market should soon recognize its immense long-term upside potential.
Remitly Global (RESERVE)
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Put back (NASDAQ:RELY) provides cross-border remittance services to migrants around the world. Despite significant headwinds that have pushed the stock down 34% over the past year, I believe RELY stock is an attractive long-term buy.
Yes, the company’s marketing spend is high and profitability is elusive for now. However, Remitly’s strong first-quarter results show that its value proposition is resonating with consumers. Revenue increased 32% to $269 millionalmost in line with estimates, while earnings per share of 8 cents greatly exceeded expectations of 3 cents.
Analysts expect an increase in revenues from $1.24 billion in 2024 to $2.13 billion in 2027More importantly, the company’s profits are expected to skyrocket from 41 cents a share to $1.70 over that time frame as margins expand.
At just 29 times forward earnings and 1.9 times sales, Remitly’s growth potential seems drastically undervalued. I expect rising migration to Western nations to boost future growth as more expats send money home. The remittance megatrend still has room to grow. Analysts are also very bullish on this name, and I think they are right.
PayPal (PYPL)
Payment via PayPal (NASDAQ:PYPL) is a leading digital payments platform connecting merchants and consumers around the world. I believe PayPal shares are unfairly trading at half their pre-COVID levels despite solid first quarter results that point to better days ahead for this fintech giant. The company delivered Currency-neutral revenue growth of 10% on an impressive total payment volume of $404 billion. This was driven by transaction margin dollars growing a better-than-expected 4% thanks to management’s targeted actions. While PayPal is still in the early stages of a multi-year transformation, the first quarter provided encouraging signs that its efforts to drive profitable growth are paying off.
Active account growth is still an issue. But even then, I think PayPal should be valued much higher, as it has proven it can squeeze more and more out of its existing user base. Its core financials have been very solid, with many metrics seeing a complete rebound.
Notably, PayPal bought back $5 billion of its undervalued stock last year and is executing another $5 billion buyback this year. The company has also reached a turning point in active accounts and revenue growth has stabilized around 8%. I believe the market is shortsightedly mispricing this household name.
As of the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any position in the securities mentioned in this article. The views expressed in this article are those of the writer, subject to InvestorPlace.com Publishing Guidelines.
Omor Ibne Ehsan is a writer for InvestorPlace. He is a self-taught investor with a focus on growth and cyclical stocks that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments like cryptocurrencies and penny stocks. You can follow him LinkedIn.