Fintech
These could be the best-performing Fintech stocks through 2030
Most of the stock headlines I’ve seen lately have to do with things like Nvidia (NASDAQ: NVDA) becoming the largest company in the United States or the S&P500 reaching new historical highs. But not all stocks are doing so well.
This is especially true in the financial technology sector, or fintech sector, where many stocks have retreated significantly from the highs achieved during the days of zero interest rate policy. And while some fintech stocks certainly present some big warning signs for investors, here are three in particular that I believe could deliver market-beating returns over the next few years.
An uncertain strategy but a huge ecosystem
PayPal (NASDAQ: PYPL) is down about 80% from its 2021 peak, and it’s easy to see why. As the COVID-19 pandemic eased, membership growth stalled and the company’s path to future earnings growth was uncertain. However, the stock could represent a great value for those who believe in the power of the PayPal ecosystem and its new management team.
The company has 427 million active users on its platform and has done a great job increasing engagement with its user base. Indeed, PayPalThe average active account now completes 13% more transactions than a year ago. The company generates more than $5 billion in annual free cash flow and is using virtually all of it to buy back shares, a good indicator that management thinks it’s a great value.
Speaking of management, PayPal not only has a new CEO, but virtually its entire leadership team has joined the company in the last six months. So far, the team is doing a great job identifying next steps, like the recent announcement that PayPal is starting an advertising business, and I can’t wait to see how it evolves.
Impressive growth and profitability, with many levers to pull
Banking disruptor SoFi (NASDAQ: SOFI) continues to grow impressively despite the challenging economic climate. Over the past year, SoFi’s membership base has grown 44% to more than 8.1 million; the company’s technology platform is working well; and the banking sector of the business continues to expand its deposit base.
There are a few reasons to love SoFi stock as a long-term investment. First, the company achieved generally accepted accounting principles (GAAP) profitability in the fourth quarter of 2023 and expects to remain profitable from here on out. In fact, management expected earnings per share (EPS) of $0.55 to $0.80 through 2026 and annual growth of 20% to 25% after that. With huge potential to grow your business and add new products over the years, this banking securities it could end up being a steal at its current sub-$7 price point.
The story continues
The market is not yet convinced
Insurance disruptor Lemonade (NYSE:LMND) has made tremendous progress. It now has 2.1 million customers and has increased current premiums by 89% over the past two years. Its customer satisfaction ratings show that the company’s user-friendly insurance approach is finding favor with customers.
Lemonade’s stock is down more than 90% from its all-time high, and one major reason is that profitability has not yet been achieved, even on an adjusted basis. To be fair, the company’s loss ratios are moving in the right direction, and an adjusted loss of $34 million in earnings before interest, taxes, depreciation, and amortization (EBITDA) is certainly better than the $51 million loss recorded in the first quarter of 2023. Management says the company will produce positive net cash flow in 2025 and ultimately achieve sustained profitability without the need to raise additional capital. But the share price tells us that investors are not convinced.
If Lemonade can hit its profitability goals and continues to grow its business at a rate above 20%, the stock could be a big winner for patient investors.
What’s best for you?
These are generally listed in order from the most stable asset (PayPal) to the most speculative (Lemonade), and which one is right for you depends on your risk tolerance and goals. Furthermore, it’s worth pointing out that none of these are particularly low risk or low volatility. I own all three and think long-term investors will be well rewarded for their patience, but it’s wise to expect a bit of a roller coaster ride along the way.
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Matt Frankel has positions in Lemonade, PayPal and SoFi Technologies. The Motley Fool has positions and recommends Lemonade, Nvidia and PayPal. The Motley Fool recommends the following options: Short June 2024 $67.50 PayPal Calls. 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