12 Most Promising Fintech Stocks To Buy
In this article, we will be taking a look at the 12 most promising fintech stocks to buy. To skip our detailed analysis of the fintech sector, you can go directly to see the 5 Most Promising Fintech Stocks To Buy.
The Financial Technology (fintech) sector has been benefitting immensely from growing investments since the last global financial crisis. With the world becoming increasingly aware of the shortcomings of the conventional financial services industry after the 2008 financial crisis, the expansion of fintech arose as a reaction. This is commonly known as the first wave of fintech, with the second wave coming about quite recently during the COVID-19 pandemic. During this time, the fintech sector evolved even further as financial institutions took steps to partner with emerging technology companies to gain access to newer markets.
The trends noticed in the second wave of fintech explain how today, apart from pure fintech companies like Coinbase Global, Inc. (NASDAQ:COIN), conventional financial companies like Mastercard Incorporated (NYSE:MA), and Visa Inc. (NYSE:V) are also beginning to join the fintech sector. Today, these companies are the most exciting fintech innovators to follow. Mastercard Incorporated (NYSE:MA) and Visa Inc. (NYSE:V) have both been working with third-party merchants on smart-chip technologies for contactless payment and more. These companies have also launched cards with embedded fingerprint scanners that act as biometric readers. They are also focusing on expanding their application programming interfaces to simplify their networks and increase their attractiveness to fintech startups.
With the growing interest in fintech mentioned above, it is unsurprising how much the sector's revenue is expected to increase in the near future. According to a Deloitte report, the global fintech revenue is expected to grow at a compound annual growth rate of 11.7% between 2019 and 2024. Between 2018 and 2020, the STOXX Global Fintech Index also rose by 50%. The fintech sector also saw share price recoveries within four months after COVID-19 hit the capital markets, demonstrating the sector's ability to rebound in times of economic turmoil. As a result, analysts and investors alike are highly bullish on the fintech sector today, leading us to compile a list of the most promising fintech stocks to buy today.
Our Methodology
We scoured the fintech stocks universe and picked 12 stocks with strong upside potential based on average analyst price targets. We used TipRanks data as the source for average price targets. These stocks are also popular among the 943 hedge funds tracked by Insider Monkey in the fourth quarter of 2022. They are ranked based on the number of hedge funds holding stakes in them, from the lowest to the highest.
Most Promising Fintech Stocks To Buy
12. Affirm Holdings, Inc. (NASDAQ:AFRM)
Upside Potential as of February 22: 15.7%
Average Price Target: $15.04
Number of Hedge Fund Holders: 22
Affirm Holdings, Inc. (NASDAQ:AFRM) is an information technology company operating a platform for digital and mobile-first commerce in the US, Canada, and internationally. The company offers a point-of-sale payment solution for consumers, merchant commerce solutions, and a consumer-focused app. It is based in San Francisco, California.
DA Davidson's analyst Christopher Brendler holds a Buy rating on Affirm Holdings, Inc. (NASDAQ:AFRM) shares as of February 9, alongside a $20 price target.
Affirm Holdings, Inc. (NASDAQ:AFRM) is a leader in the Buy Now Pay Later area, and it has made deals with companies like Amazon.com, Inc. to offer its BNPL services. As of this February, the company has grown its active consumers by 39% year-over-year to 15.6 million. The company's merchants have also increased year-over-year by 45% to 243,000. This demonstrates the promising nature of Affirm Holdings, Inc.'s (NASDAQ:AFRM) strong brand.
In total, 22 hedge funds were long Affirm Holdings, Inc. (NASDAQ:AFRM) in the fourth quarter, with a total stake value of $65.2 million.
Affirm Holdings, Inc. (NASDAQ:AFRM), like Coinbase Global, Inc. (NASDAQ:COIN), Mastercard Incorporated (NYSE:MA), and Visa Inc. (NYSE:V), is a fintech company with overwhelming potential according to hedge funds today.
11. SoFi Technologies Inc. (NASDAQ:SOFI)
Upside Potential as of February 22: 21.78%
Average Price Target: $7.94
Number of Hedge Fund Holders: 25
SoFi Technologies Inc. (NASDAQ:SOFI) is a digital financial services provider based in San Francisco, California. The company operates through its Lending, Technology Platform, and Financial Services segments. Its products and services allow consumers to borrow, save, spend, invest and protect their money.
Ashwin Shirvaikar at Citigroup holds a Buy rating on SoFi Technologies Inc. (NASDAQ:SOFI) shares as of January 31.
The company has demonstrated significant growth potential in the fourth quarter. SoFi Technologies Inc. (NASDAQ:SOFI) increased its net interest income by 138% year-over-year in the period. Company management also sees more potential in its growing brand power, as annualized revenue per product increased from $21 in the fourth quarter of 2021 to $40 in the fourth quarter of 2022. This demonstrated more brand awareness for SoFi Technologies Inc. (NASDAQ:SOFI) products among consumers.
Silver Lake Partners was the largest shareholder in SoFi Technologies Inc. (NASDAQ:SOFI) at the end of the fourth quarter, holding 31.2 million shares worth about $143.6 million. In total, 25 hedge funds were long the stock, with a total stake value of $371.3 million.
10. Nu Holdings Ltd. (NYSE:NU)
Upside Potential as of February 22: 35.84%
Average Price Target: $6.5
Number of Hedge Fund Holders: 31
Nu Holdings Ltd. (NYSE:NU) is a digital financial services platform and technology company. It operates mainly in Brazil, Mexico, and Colombia and is based in São Paulo, Brazil.
Wolfe Research analyst Darrin Peller holds an Outperform rating on Nu Holdings Ltd. (NYSE:NU) shares as of January 5.
Warren Buffett is the largest shareholder in Nu Holdings Ltd. (NYSE:NU) as of the end of the fourth quarter. In 2022, Buffett's Berkshire Hathaway bought a $1 billion stake in the company. Buffett's interest in the company is a strong indicator of its immense growth potential. Nu Holdings Ltd. (NYSE:NU) also reported a 171% increase in its revenue for the quarter that ended September 30, bringing it up to a record $1.3 billion.
A total of 31 hedge funds were long Nu Holdings Ltd. in the fourth quarter, with a total stake value of $1.2 billion.
9. Robinhood Markets Inc. (NASDAQ:HOOD)
Upside Potential as of February 22: 31.24%
Average Price Target: $12.94
Number of Hedge Fund Holders: 32
Robinhood Markets Inc. (NASDAQ:HOOD) is an investment banking and brokerage company based in Menlo Park, California. The company offers a platform through which users can invest in stocks, exchange-traded funds, options, gold, and crypto.
As of January 10, JMP Securities analyst Devin Ryan holds an Outperform rating on Robinhood Markets Inc. (NASDAQ:HOOD) shares, alongside a $25 price target.
Robinhood Markets Inc. (NASDAQ:HOOD) demonstrated growth in the fourth quarter when its revenue grew by 5% year-over-year to $380 million. The company is also expected to benefit from the rising prices of Bitcoin and Dogecoin. Bitcoin rose by over 40% in January, and since Robinhood Markets Inc. (NASDAQ:HOOD) depends on crypto and options for its transaction-based revenues, analysts expect the company to fare better in the coming months.
Robinhood Markets Inc. (NASDAQ:HOOD) was found in the 13F holdings of 32 hedge funds at the end of the fourth quarter. Their total stake value was $652 million. ARK Investment Management was the largest shareholder in the company, holding 29.2 million shares worth $238.1 million.
8. Paylocity Holding Corporation (NASDAQ:PCTY)
Upside Potential as of February 22: 38.65%
Average Price Target: $282.42
Number of Hedge Fund Holders: 33
Paylocity Holding Corporation (NASDAQ:PCTY) is an application software company providing cloud-based human capital management and payroll software solutions in the US. The company is based in Schaumburg, Illinois. It works to simplify payroll, automate processes, and more.
Cowen analyst Bryan Bergin holds an Outperform rating on Paylocity Holding Corporation (NASDAQ:PCTY) shares as of February 3. The analyst also raised his price target on the stock from $231 to $265.
The company beat its revenue guidance in the first fiscal quarter of 2023 by $12 million, when revenue came in at $253.3 million. Paylocity Holding Corporation (NASDAQ:PCTY) generated a profit of $84.5 million in this quarter, which was an increase of $21 million year-over-year. The company is currently guiding for a full-year 2023 revenue of $1.1 billion to $1.2 billion, up about 32% from the previous year.
Paylocity Holding Corporation (NASDAQ:PCTY) had 33 hedge funds long its stock in the fourth quarter, with a total stake value of $798 million.
ClearBridge Investments, an investment management firm, mentioned Paylocity Holding Corporation (NASDAQ:PCTY) in its fourth-quarter 2022 investor letter. Here's what the firm said:
“Paylocity Holding Corporation (NASDAQ:PCTY) also held up well against broad customer spending slowdowns earlier in the year but saw its share price weaken on broader macro headwinds during the quarter. The company’s cloud-based human capital management and payroll software solutions help businesses manage through broad labor shortages and provide solutions to retain talent. However, as excess slack in the labor market has begun to be absorbed, investments in human resources solutions have declined. Additionally, we believe Paylocity continues to have a compelling long-term growth runway as it attracts new customers and gains market share against large, mature competitors.”
7. Block, Inc. (NYSE:SQ)
Upside Potential as of February 22: 22.41%
Average Price Target: $97.35
Number of Hedge Fund Holders: 70
Block, Inc. (NYSE:SQ) is a data processing and outsources services company based in San Francisco, California. It creates tools that help sellers to accept card payments, alongside providing reporting and analytics, and next-day settlement.
KeyBanc raised its price target on Block, Inc. (NYSE:SQ) shares on February 22 from $90 to $100. The firm holds an Overweight rating on the stock.
6. Mercadolibre, Inc. (NASDAQ:MELI)
Upside Potential as of February 22: 16.04%
Average Price Target: $1,468.75
Number of Hedge Fund Holders: 75
Mercadolibre, Inc. (NASDAQ:MELI) is an internet and direct marketing retail company based in Montevideo, Uruguay. The company operates online commerce platforms in Latin America. Its platform, Mercado Libre Marketplace, enables businesses, merchants, and individuals to list merchandise and conduct sales online.
On February 21, Credit Suisse analyst Stephen Ju reiterated an Outperform rating on Mercadolibre, Inc. (NASDAQ:MELI) shares. The analyst also raised his price target on the stock from $1,450 to $1,685.
Mercadolibre, Inc. (NASDAQ:MELI) has recently partnered with WhatsApp Pay in a bid to expand its e-commerce and fintech market share in Brazil. The company is set to benefit from the new customers available to it through this partnership, since WhatsApp has the highest penetration rate in the Latam social media market, going up to 90% by 2022. Mercadolibre, Inc. (NASDAQ:MELI) has also been seeing promising growth in its Argentina operations, with operating margins of 38.4%.
Generation Investment Management was the largest shareholder in Mercadolibre, Inc. (NASDAQ:MELI) at the end of the fourth quarter, holding 707,061 shares worth about $598.3 million. In total, 75 hedge funds were long the stock, with a total stake value of $3.2 billion.
Lakehouse Capital, an investment management company, mentioned Mercadolibre, Inc. (NASDAQ:MELI) in its November 2022 investor letter. Here's what the firm said:
“A noteworthy result in November was Buenos Aires based e-commerce leader Mercadolibre, Inc. (NASDAQ:MELI), which posted another impressive quarterly result despite ongoing macro concerns. The company delivered net revenue growth of 45% year-on-year in U.S. dollar terms along with a steady increase in operating profitability, with operating margins increasing 240 basis points to 11%. Its marketplace business experienced strong growth across all key markets – namely Brazil, Argentina and Mexico – and generated $8.6 billion in gross merchandise value, up 32% year-on-year. It was also pleasing to see unique buyers increase 10% to 42.5 million and items purchased per buyer remain broadly stable, indicating stickiness among recently acquired users and market share gains in some of its largest markets, particularly Brazil.”
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Disclosure: None. 12 Most Promising Fintech Stocks To Buy is originally published on Insider Monkey.
