Fintech
The 7 Best Fintech Stocks to Buy Now: Summer 2024
There is a lot of money in money. The fintech sector is expected to maintain a Compound annual growth rate of 16.5% between now and 2032. That growth rate should be music to the ears of fintech investors, but not all stocks have performed well.
Many established banks have unattractive long-term results. For example, Citigroup (London share:C) has been declining for the past five years, despite a good rally since the beginning of the year. Fargo Wells (London share:WFC) remained unchanged for several years before posting a 22% gain year-to-date.
As established banks offer lower P/E ratios, investors may want to look fintech stocks with higher valuations that also promise better growth prospects. Depending on where you look, you may find fintech stocks with decent valuations and promising growth prospects. Wondering which fintech stocks look the most attractive as the summer begins to wind down? Here are some of the best fintech stocks to consider for long-term returns.
Holding Company (NU)
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New participations (London share:NEW) is a Brazilian digital bank that recently has surpassed 100 million customersThe shares are up 53% year to date and are trading at a P/E ratio of 48. That’s a higher valuation than most banks, but the financials make it easier to understand.
While most banks have flat or mild revenue growth, Nu Holdings posted 69% year-over-year revenue growth in first quarter 2024. Net income rose 167% YOY in the same quarter, with a net profit margin of 13.8%. The majority of Nu Holdings’ customers are active, with an activity rate of 83% at the end of the quarter. The fintech company offers bank accounts, credit cards, brokerage accounts, loans, and other financial products to keep customers engaged.
Wall Street analysts believe the stock has more room to grow. The average target price implies a 17% increase from current levels. The higher price target of $16 per share suggests a potential gain of 29%.
Robinhood (HOOD)
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Robin Hood (NASDAQ:HOOD) is another fintech stock that has had incredible success this year. Shares are up 71% year-to-date, while revenue and earnings have skyrocketed. Cryptocurrency traders have played a role in the company’s 40% annual revenue growth in first quarter. Cryptocurrency transaction revenue jumped 232% year-over-year to $126 million. This represented more than 20% of total revenue. Stock and option transaction revenue had year-over-year gains of 44% and 16%, respectively.
Robinhood has two other components of total revenue: interest revenue and other revenue. These segments are up 22% YOY and 35% YOY, respectively. The majority of the “Other Revenue” category is made up of Robinhood Gold, an innovative financial product that could challenge other banks and brokerages to offer something similar in the future.
Profits are also up. Robinhood reported $157 million in net income compared to a net loss of $511 million in the same period last year.
American Express (AXP)
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American Express (London share:ASCENT) makes money from transaction fees, annual fees, and other costs associated with owning a credit or debit card. The business model has worked well for decades, and the stock trades at a reasonable valuation. The stock’s P/E ratio of 18 looks attractive, given the company’s financial performance in recent quarters.]
Second quarter 2024 revenue increased 8% YOY to $16.3 billion. Net income grew at a faster pace, 39% YOY, to $3.02 billion. Revenue marked an all-time high for the company, as individuals and businesses opened 3.3 million new cards. American Express also raised its full-year EPS forecast from $12.65-$13.15 to $13.30-$13.80.
Shares are up 31% year to date and have climbed 94% over the past five years. American Express also offers a yield of 1.14% and has consistently maintained a double-digit dividend growth rate for several years. Wall Street analysts have rated the stock as Moderate purchase.
SoFi (SOFI)
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SoFi (NASDAQ:SOPHIE) is a digital bank that offers credit cards, brokerage accounts, bank accounts, loans, and other financial products. The company has not delivered pleasing returns since it became a publicly traded company, but skyrocketing revenue and net income growth suggests that the tide is turning.
Revenue increased 37% year-over-year in first quarter. Profit came in at $88.0 million compared to a net loss of $34.4 million in the same period last year. SoFi also ended the quarter with 8.1 million active members. This is a 44% YOY improvement for the fintech company.
Wall Street Analysts they rated the stock as Hold at different price points. The average target price suggests SoFi should gain 10% from current levels. The highest target price of $12 per share suggests a more optimistic gain of 62% from current levels. SoFi can reach the latter target price if revenue and profit margins continue to rise.
Morning Star (MORN)
Morning Star (NASDAQ:MORNING) is an investment research firm that helps investors make data-driven decisions with their portfolios. The company offers a range of products covering data analytics, market insights, simulations and other areas. The shares are up 18% year to date and have more than doubled in the past five years.
The stock has a P/E ratio of 57 and a yield of 0.50%. Morningstar recently increased its dividend by 8% year-over-yearfrom a quarterly payment of $0.375 to $0.40 per share. Morningstar has a good history of maintaining a solid dividend growth rate for several years.
The Morningstar second quarter results suggest the rally may continue. Revenue increased 13.3% YOY to $571.9 million. Meanwhile, diluted net income per share jumped 90.5% YOY to $1.60. Profits came in at $69.1 million, with a net profit margin of 12.1%. Morningstar’s revenues also increased 13.2% YOY over the past six months.
Moody’s (MCO)
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By Moody (London share:MCO) is a risk management firm that has produced similar earnings to Morningstar. The stock is up 18% year to date and has gained 121% over the past five years. Moody’s trades at a P/E ratio of 44 and offers a yield of 0.76%. Moody’s has increased its dividend for 15 years while maintaining a Annualized dividend growth rate of 11.82% in the last decade.
The fintech company reported strong second-quarter results. Revenue increased 22% year-over-year to $1.8 billion, while adjusted diluted EPS increased 43% year-over-year to $3.28. Moody’s maintained the same year-over-year revenue growth rate over the past six months, while EPS increased 26% year-over-year compared to the previous six months. Earnings are accelerating and outpacing revenue growth, translating into higher profit margins.
Moody’s Investors Service Revenue was a key driver of growth. This segment grew 36% YOY compared to a 7% YOY increase in Moody’s Analytics revenue.
Seen (V)
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Visa (London share:AND) is another credit and debit card issuer that deserves a closer look. The stock hasn’t done well this year and is flat so far. However, it has a yield of 0.80% and has consistently maintained a double-digit dividend growth rate.
The credit and debit card issuer’s financials were strong, despite flat year-to-date performance. Visa reported 10% year-over-year revenue growth in the third quarter of its fiscal year 2024. Net income jumped 17% year-over-year to $4.9 million. Visa ended the quarter with a net profit margin of 54.7%. The company regularly achieves net profit margins above 50%. Cross-border volume increased 14% year-over-year in the third quarter, contributing to the strong earnings report.
Visa has many fans on Wall Street. The stock is rated as Strong buy with an average price target that predicts a gain of 22% from current levels. The higher price target of $345 implies that the stock can gain an additional 33%.
As of this publication date, Marc Guberti held a long position in SOFI. The views expressed in this article are those of the author, subject to InvestorPlace.comPublishing Guidelines.
As of the date of publication, the responsible editor did not hold (either directly or indirectly) any position in the securities mentioned in this article.
Marc Guberti is a freelance finance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including US News & World Report, Benzinga, and Joy Wallet.