Undervalued fintech stocks are ripe for the picking for savvy investors.
The fintech market has proven resilient, dazzling everyone with innovation and expansion. Despite operating in unconducive market conditions, marked by a slowdown in funding and valuation, the fintech space continues to hold its own.
Moreover, there’s plenty of growth that still needs to be tapped. With transformative technologies, including generative AI, reshaping services, and millions still unbanked, the industry is set for rapid expansion. According to McKinsey, fintech will outpace the overall banking industry’s growth by nearly threefold from 2022 to 2028. Hence, this spells an opportunity for investors to scoop up undervalued stocks in this vibrant sector.
However, when bargain hunting, it’s imperative to avoid catching falling knives. With that in mind, here are three undervalued fintech stocks that have been punished unfairly but offer tremendous growth prospects ahead. Their core operations are firing on all cylinders, boasting robust financial vitality.
Undervalued Fintech Stocks To Buy: SoFi Technologies (SOFI)
SoFi Technologies (NASDAQ:SOFI) is a dynamic fintech growth stock offering a suite of lending, investing, and personal finance products. Despite its strong operational achievements and superb financial footing, SOFI has been a battleground stock. It epitomizes the rollercoaster nature of fintech stocks, fluctuating from an all-time high of $25.78 achieved during the pandemic to a modest $6.57 currently. SOFI stock has shed 18.4% of its value in the past year alone.
Despite this volatility, SoFi’s operational performance remains excellent. In the first-quarter (Q1) of 2024, the firm boasted adjusted net revenue of $581 million, marking a 26% bump on a year-over-year (YOY) basis. This consistent top-line growth is impressive, to say the least, especially considering that SoFi has maintained over 25% growth for the past twelve consecutive quarters.
Things are even more exciting at the bottom line. SoFi’s adjusted EBITDA surged to $144 million in Q1, up a remarkable 91% YOY. Moreover, analysts expect it to finally break even this year, posting an EPS of two cents, surpassing estimates by one cent.
Nu Holdings (NU)
Nu Holdings (NYSE:NU) is Brazil’s premier digital bank, effectively redefining financial services in the Latin American region. Since its inception in 2013, Nu has become the largest digital bank in the area while maintaining a robust growth trajectory. Its comprehensive platform serves north of 100 million users, offering everything from credit cards and personal loans to digital payments and brokerage accounts. Moreover, it provides all these services and more without the fees usually associated with traditional banks.
Financially, Nu Holdings is on an upward trajectory. Its most recently released quarterly showing had net income jumping to $378.8 million, more than doubling from the previous year’s $141.8 million. Moreover, revenues surged by 67% YOY to $2.7 billion in Q1, driven by an 83% activity rate among users. These figures point to the bank’s operational efficiency while underscoring the potent appeal of its diverse financial offerings. Moreover, it enjoys staggering customer base growth, adding 20.2 million new users YOY to reach 99.3 million at the end of Q1.
PayPal (PYPL)
PayPal (NASDAQ:PYPL) shines as another top undervalued fintech gem.
Over the past few years, we’ve seen an unprecedented shift in shopping habits. From lockdown-induced online spending sprees to the current normalization of digital transactions, things haven’t been good for the likes of PayPal. However, consumers are finally settling into their online shopping routines, which bodes remarkably well for PYPL stock.
On the operational front, the fintech pioneer continues to impress. It has comfortably beaten top-line estimates for the past five consecutive quarters. Its Q1 results showed a commendable 10% increase in sales, reaching $7.7 billion, while total payment volume (TPV) surged by 14%. Additionally, international TPV was particularly strong, rising 17%, fueled by European and Asian gains. Financially, PayPal stands on solid ground, maintaining impressive YOY growth in net income and free cash flow margins at 14.3% and 21.4%, respectively.
Moreover, with PYPL stock trading at just 1.93 times forward sales estimates, Wall-Street assigns an encouraging ‘moderate buy’ rating and expects a 27% upside from current prices.
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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
