In the ever-evolving world of financial technology, fintech stocks have recently hit a rough patch. Marred by operational misalignments and the crippling impact of rising interest rates, many of these stocks now find themselves near 52-week lows. However, amidst this turmoil, a select few undervalued fintech stocks to buy stand out, offering a beacon of hope for savvy investors.
These three standout fintech firms offer promising prospects for rapid expansion, further solidifying their presence in the global financial realm. Moreover, the current extreme pessimism, evident in record-low valuations, hints at a stellar opportunity. It’s crucial to remember that fintech’s main rival remains traditional cash. The ongoing shift from cash to digital payments is a persistent trend underpinning long-term growth for these undervalued fintech stocks.
Undervalued Fintech Stocks: PayPal (PYPL)
PayPal (NASDAQ:PYPL) emerges as an attractive investment with its robust growth and stellar profitability, primarily due to its current undervalued state. The company’s new CEO, Alex Chriss, has implemented potent strategic cost-cutting measures, carving a path toward a more streamlined and efficient operation. These initiatives are likely to charm larger investors and Wall Street, boosting PayPal’s stock value.
In the third quarter of 2023, PayPal displayed impressive performance, reporting a total payment volume of $387.7 billion, an 8% up in net sales, and a 20% bump in non-GAAP EPS. The company is not resting on its laurels either, with plans to propel revenue growth in the fourth quarter and a commitment to repurchasing $5 billion worth of shares in FY23. Moreover, PayPal’s foray into the crypto space with its regulated stablecoin, PayPal USD, marks a significant stride. Already accessible on Venmo, PYUSD facilitates quick, cost-effective online transactions, gaining popularity across multiple exchanges and wallets. Hence, the fintech giant’s future, backed by strategic innovation and market trends, looks exceedingly bright, with PYPL stock trading at under two times forward sales estimates, roughly 10% lower than the sector median.
SoFi Technologies’ (SOFI)
Despite the prevailing skepticism, SoFi Technologies’ (NASDAQ:SOFI) shows tremendous potential for success even during tough macroeconomic conditions. The company’s focus on high-quality unsecured personal loans and a customer-first strategy has been paying off on the back of rising memberships and deposits. Moreover, SoFi’s ambition for positive GAAP earnings and analysts’ predictions of solid earnings growth paint a stellar picture of the firm’s future valuation.
Recently, President Chad Morton, CRO Aaron Webster, and CMO Lauren Stafford Webb have sold a substantial amount of company shares, hinting at possible concerns. However, CEO Anthony Noto and CFO Chris Lapointe’s share purchases solidify their belief in SoFi’s potential.
Adding to the optimism, hedge funds have increased their holdings in SoFi by 376,800 shares in the last quarter. According to Tiprank, SoFi stock currently holds a ‘Moderate Buy’ rating based on assessments from 12 analysts, suggesting a potential 42.4% upside. This data, combined with SoFi’s appeal to younger demographics, positions the company as a potentially lucrative option for bullish investors.
Block (SQ)
Block (NYSE:SQ), led by Jack Dorsey, saw its shares surge by 10% following a stellar third quarter performance that comfortably exceeded Wall Street expectations. The fintech giant reported an impressive EPS of 55 cents, surpassing the forecasted 47 cents. Its revenue reached $5.62 billion, topping the expected $5.44 billion.
Boosting Block’s fortunes is its involvement in the cryptocurrency market, especially Bitcoin. The company reported a remarkable 38% bump in Bitcoin sales in the third quarter, rising to $2.42 billion from $1.76 billion the previous year. This success with Bitcoin has prompted Block to project a higher 2023 gross profit between $7.44 billion and $7.46 billion. Additionally, the company forecasts an adjusted EBITDA of $2.40 billion for 2024, surpassing the $1.94 billion estimate, and remains on track to achieve its $1.50 billion EBITDA target for 2023. Additionally, Block stock is trading at 1.44 times forward sales, a 35% difference from the sector median.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
