5 Hard-Hit Fintech Stocks with More Than 55% Upside Potential
Multi-decade-high inflation, the Fed's forthcoming interest rate increases, and ongoing geopolitical tensions have driven a sharp market correction of late. And fintech stocks PayPal (PYPL), Coinbase (COIN), Robinhood (HOOD), StoneCo...
Multi-decade-high inflation, the Fed's forthcoming interest rate increases, and ongoing geopolitical tensions have driven a sharp market correction of late. And fintech stocks PayPal (PYPL), Coinbase (COIN), Robinhood (HOOD), StoneCo (STNE), and Paysafe (PSFE) have been among the major losers in this correction. But Wall Street analysts expect these stocks to rebound soon. So, let's discuss.
Since the beginning of the year, the benchmark indexes have suffered immense volatility on concerns over multi-decade-high inflation and the Fed's impending interest rate increases. The Russia-Ukraine war has added to the concerns. Also, supply chain disruptions and rising energy prices due to increased sanctions on Russia are keeping investors worried. So, many fintech stocks have been hard hit this year.
However, the fintech industry has played a pivotal role in helping improve payments processing, insurance, lending, and wealth management. The innovations in financial services delivered by fintech companies–among other attributes they have brought down transaction costs–have made them more popular than traditional banks. According to a Kenneth Research report, the global fintech market is expected to reach $305.70 billion by 2023, growing at a 22.2% CAGR.
Given this backdrop, we think it could be wise to add hard-hit fintech stocks PayPal Holdings, Inc. (PYPL), Coinbase Global, Inc. (COIN), Robinhood Markets, Inc. (HOOD), StoneCo Ltd. (STNE), and Paysafe Limited (PSFE) to one's watchlist. Wall Street analysts expect these stocks to soar more than 55% in price in the coming months.
PayPal Holdings, Inc. (PYPL)
PYPL in San Jose, Calif., is a technology platform and digital payments company that enables digital and mobile payments on behalf of consumers and merchants. Its combined payment solutions comprise its Payments Platform, which includes PayPal, PayPal Credit, Braintree, Venmo, Xoom, iZettle, and Hyperwallet products and services.
On Oct. 12, 2021, PYPL announced the acquisition of Japan-based buy now, pay later (BNPL) solutions company Paidy. The acquisition bodes well for PYPL because it expands its capabilities, distribution, and relevance in the Japanese payments market, complementing its existing cross-border e-commerce business. Peter Kenevan, VP, Head of Japan, said, "Combining Paidy's brand, capabilities and talented team with PayPal's expertise, resources, and global scale will create a strong foundation to accelerate our momentum in this strategically important market."
PYPL's net revenues increased 13% year-over-year to $6.91 billion for its fourth quarter, ended Dec. 31, 2021. The company's non-GAAP net income increased 2.9% year-over-year to $1.31 billion. Also, its non-GAAP EPS came in at $1.11, representing a 4% increase year-over-year.
Analysts expect PYPL's EPS and revenue for its fiscal year 2023 to increase 24.9% and 19.7%, respectively, year-over-year to $5.82 and $35.18 billion. It surpassed the Street's EPS estimates in three of the trailing four quarters. Over the past six months, the stock has lost 65.3% in price to close the last trading session at $98.55. However, Wall Street analysts expect the stock to hit $182.36 in the near term, indicating a potential 85% upside.
Coinbase Global, Inc. (COIN)
COIN is a financial technology company that provides end-to-end economic infrastructure and technology. The San Francisco-based concern offers the primary financial account in the crypto economy for retailers, a marketplace with a pool of liquidity for transacting in crypto assets for institutions, and technology and services that enable ecosystem partners to build crypto-based applications and securely accept crypto assets payments.
For the fourth quarter, ended Dec. 31, 2021, COIN's net revenue increased 401% year-over-year to $2.49 billion. The company's adjusted EBITDA increased 318.4% year-over-year to $1.20 billion. Also, the company's trading volume increased 514.6% year-over-year to $547 billion.
For its fiscal year 2023, COIN's EPS and revenue are expected to increase 358.9% and 19.6%, respectively, year-over-year to $2.57 and $8.49 billion. It surpassed consensus EPS estimates in three of the trailing four quarters. And over the past three months, the stock has declined 32.3% in price to close the last trading session at $172.97. However, Wall Street analysts expect the stock to hit $304.93 in the near term, indicating a potential 76.2% upside.
Robinhood Markets, Inc. (HOOD)
Famous financial services platform provider HOOD, which is headquartered in Menlo Park, Calif., is focused on developing an application for cash management that includes stocks, ETFs, options, and cryptocurrency. The company's platform provides trading in U.S. listed stocks, exchange-traded funds (ETFs), options, American depository receipts (ADRs), and cryptocurrency.
On Dec. 1, 2021, HOOD announced a new feature in its efforts to become a single money app destination that will allow its members to transfer stocks, ETFs, and specific options contracts from any individual, non-retirement brokerage account. HOOD also said that it would reimburse the transfer fee of up to $75 charged by the other brokerages to make the transfer if requested by the customer.
HOOD's net revenues increased 14% year-over-year to $363 million for the fourth quarter, ended Dec. 31, 2021. The company's transaction-based revenues increased 12% year-over-year to $264 million. Also, its monthly active users (MAU) increased 48% year-over-year to 17.30 million. In addition, its cash and cash equivalents at the end of its fiscal 2021 came in at $6.25 billion, representing a 345.8% increase year-over-year.
Analysts expect HOOD's EPS for the quarter ending June 30, 2022, to increase 85.6% to $0.31. Its revenue for its fiscal year 2023 is expected to increase 37.9% year-over-year to $2.49 billion. Over the past six months, the stock has declined 70.7% in price to close the last trading session at $12.05. However, Wall Street analysts expect the stock to hit $19 in the near term, indicating a potential 57.6% upside.
StoneCo Ltd. (STNE)
Headquartered in George Town, Cayman Islands, STNE is a fintech company that provides an end-to-end, cloud-based technology platform to conduct electronic commerce across in-store, online, and mobile channels. It has designed a cloud-based platform that helps clients connect, get paid, and grow their businesses while meeting the rapidly changing demands of omnichannel commerce.
STNE's TPV for its fiscal third quarter, ended Sept. 30, 2021, increased 7.6% year-over-year to R$75 billion ($14.92 billion). The company's total revenue and income increased 57.3% year-over-year to R$1.46 billion ($0.29 billion). Also, its total active payment clients increased 111.8% year-over-year to 1.4 million.
For its fiscal 2022, STNE's EPS is expected to increase 1,125% year-over-year to $0.49. Its revenue for the quarter ending Dec. 31, 2021, is expected to increase 78.4% year-over-year to $340.96 million. Over the past year, the stock has declined 86.5% in price to close the last trading session at $9.51. However, Wall Street analysts expect the stock to hit $22.13 in the near term, indicating a potential 132.7% upside.
Paysafe Limited (PSFE)
Based in Hamilton, Bermuda, PSFE is a specialized payments platform. The company's purpose is to enable businesses and consumers to connect and transact through various capabilities in payment processing, digital wallet, and online cash solutions. Its products include Direct Debt, Digital Wallets, Integrated Payments, Online Payments, and Publishers Marketplace. It serves the education, field services, and financial services industries.
On Jan. 31, 2022, PSFE announced the completion of its acquisition of SafetyPay. SafetyPay enables e-commerce transactions via a wide choice of open banking and eCash solutions in Latin America. The acquisition allows PSFE to further scale its operations in Latin America. Together with the acquisition of PagoEfectivo, this deal is expected to make PSFE a leading open banking and eCash solutions provider in Latin America. It is also likely to open multiple cross-selling opportunities across PSFE's business units.
PSFE's revenues have increased 0.3% year-over-year to $371.66 million for the fourth quarter, ended Dec.31, 2021. The company's net income came in at $90.29 million, compared to a $3.39 million net loss in the year-ago period. Also, its adjusted EBITDA increased 10.6% year-over-year to $105.45 million.
Analysts expect PSFE's EPS and revenue for its fiscal year 2022 to increase 143.5% and 4.1%, respectively, year-over-year to $0.10 and $1.55 billion. Over the past year, the stock has gained 78.1% in price to close the last trading session at $3.23. However, Wall Street analysts expect the stock to hit $5.75 in the near term, indicating a potential 78% upside.
PYPL shares rose $1.83 (+1.86%) in premarket trading Friday. Year-to-date, PYPL has declined -47.74%, versus a -10.42% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master's degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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