Prediction: These Could Be the Best-Performing Fintech Stocks Through 2030
The financial technology, or fintech, industry has been on a wild ride over the past few years. Low interest rates helped spur new products and services from companies, but then the Federal Reserve’s rapid interest rate hikes slowed fintech growth.
However, a handful of companies have emerged stronger and are well on their way toward becoming potential winners for investors. Here are three fintech stocks that could perform well in the coming years.
1. SoFi Technologies
SoFi Technologies (NASDAQ: SOFI) offers customers various fintech services, from savings accounts to investing and lending. And while people have their pick of online banks these days, SoFi continues to attract customers.
The company added 643,000 customers in the second quarter, a 41% increase from the same period the year before, putting SoFi’s total customer count at an impressive 8.8 million. The company’s sales growth in the quarter was just as impressive, increasing 20% to $598.6 million.
But it’s SoFi’s profitability that long-term investors may want to consider. The company just had its third consecutive quarter of profitability and made impressive strides in a short amount of time. Net income was $17.4 million in the most recent quarter, up from a loss of $47.5 million in the year-ago quarter.
Despite SoFi’s momentum, the company’s shares still trade at a discount. SoFi’s price-to-sales ratio (P/S) is just 2.8 at recent prices, down from a P/S of 4 around this time last year. With the company’s strong customer base and profitability, I think SoFi is setting itself up to be a strong fintech play over the next few years.
2. PayPal Holdings
As an established player in digital payments, PayPal (NASDAQ: PYPL) has been forced to adjust to a rapidly expanding fintech space and fend off more competitors than ever before. To navigate a brave new payments world, the company pushed the reset button on its entire C-suite over the past year.
Under the new leadership of CEO Alex Chriss, PayPal is turning things around. In the second quarter, PayPal’s earnings and revenue under generally accepted accounting principles (GAAP) topped analysts’ estimates, growing 17% and 8%, respectively. The company’s transaction per active account was also up, rising 11%.
But it’s not just PayPal’s recent growth investors should take note of. The company is also on a solid financial footing, with free cash flow of $1.4 billion in the quarter and cash and cash equivalents of over $18 billion.
With PayPal’s new leadership getting the company back on track, long-term investors have an opportunity to snatch up PayPal’s shares while they’re still down. The stock’s price dropped 70% over the past three years. But with its turnaround well underway, betting on the company’s current recovery may look like a smart move in a few years.
3. Visa
Visa‘s (NYSE: V) payment processing businesses collect fees when companies make sales through their payment platforms. The company is dominant in this space, holding about 40% of the market, ahead of all its U.S. competitors.
Cashless payments are soaring globally and will reach $2.2 trillion by 2027, according to Statista, up from $1.5 trillion right now. And Visa’s leading position in the payment space gives it a leg up over rivals as this trend grows.
Visa also has other opportunities it’s tapping into with its “other revenue” category, which includes advisory services, marketing, and licensing. Other revenue was up 31% in the fiscal third quarter (which ended June 30) and now accounts for about 9% of Visa’s total sales.
Even with Visa well positioned in the payments space, the company’s share price is down about 6% over the past six months. That’s giving investors a chance to pick up Visa’s shares at a relative discount right now.
While all of these fintech stocks have great growth potential over the next few years, it’s worth mentioning that the market could experience some volatility as investors process rising unemployment and potential Federal Reserve rate cuts. Instead of fixating on the short-term noise, focus on the fintech market’s long-term potential.
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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends PayPal and Visa. The Motley Fool recommends the following options: short September 2024 $62.50 calls on PayPal. 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
