The fintech stocks had their heyday back in 2020-21 when it was thought they’d pose a serious threat to the market share of traditional financial institutions (think the banks). When the pandemic lockdowns happened and online shopping went into overdrive in what was a “roaring start” to the 2020s, it seemed like the market’s fintech darlings could only go higher.
The blistering momentum eventually ran out of steam, and fintech stocks were among the first of the dominoes to fall as the 2022 market sell-off unfolded. Undoubtedly, some of the tech-savviest fintech “disruptors” have still yet to recover. Not only that, but some, like PayPal (NASDAQ:PYPL), have shown little signs of life, with the stock now trading even lower than the lows of 2022.
As the age of AI unfolds, the fintech firms may just be able to garner enough enthusiasm to get a second wind. Indeed, many financial tech companies have been investing in various AI technologies. And some may lead to returns as AI benefits more closer downstream. Let’s check in on three.
PayPal (PYPL)
PayPal held a tech-filled event earlier this year, highlighting a handful of AI-driven innovations that management thought would “revolutionize commerce” and start “the next chapter.” Management and the event’s presenters were pumped. Investors weren’t, even after having more time to digest the finer details of the AI-driven event.
Will new AI-powered PayPal features make things easier for customers? Definitely. But are they revolutionary? Though I wasn’t blown away, I was intrigued, especially if PayPal can add to its arsenal of AI features.
Looking ahead, PayPal must continue investing heavily in AI if PYPL stock is starting to regain some ground. The good news is that management is very serious about placing big bets on AI as the machine learning and fintech worlds meld.
With Apple (NASDAQ:AAPL) recently attracting regulatory scrutiny over its payment business, perhaps PayPal will have an easier time making a run for the fintech throne. Having a regulatory add hurdles in front of a top rival is always a good thing!
At 15.1 times trailing price-to-earnings (P/E), the fintech stock is a bargain in more ways than one.
Robinhood Markets (HOOD)
Robinhood Markets (NASDAQ:HOOD) is the platform of choice for many meme stock investors who took to Reddit (NASDAQ:RDDT) to chat about what Roaring Kitty has been up to. Undoubtedly, Robinhood may have a track record for being a speculator’s playground.
Regardless, I continue to view the platform as boasting impressive tailwinds in the early innings of a bull market powered by revolutionary new technologies, most notably AI.
The brokerage firm reportedly acquired AI investment researcher Pluto. Such a deal could help Robinhood further differentiate itself from traditional brokerages. Indeed, Robinhood has always been about using tech to open investing to younger, often tech-savvy customers.
AI-powered investment insights and analysis from Pluto probably won’t help its customers beat the market. However, I do view the move as a boon for trading activity. And it may just draw in users seeking a truly innovative brokerage platform.
All considered, HOOD stock is a great fintech firm that’s flashier (think those gold credit cards) than the rest.
American Express (AXP)
American Express (NYSE:AXP) is a credit card company that, like Robinhood, has really been catching on with young people lately. The only thing flashier than a golden creditcard from Robinhood is American Express’ unmistakable Centurion (black) card. Of course, such an invite-only card is out of reach for most such consumers.
That said, with increased interest in premium Platinum (and Gold) cards, which entail a fee, American Express has a unique opportunity to bring a wave of new tech to the next generation of paid card customers.
Indeed, the closed-loop system is a unique advantage American Express has over rivals. It can allow American Express to leverage data to give customers the features they want. As the company deploys AI to unearth data from its data resources, it’s hard not to view American Express as one of the most underrated fintech stocks on the market.
In the meantime, AXP stock looks cheap (and buyable) at 19.7 times trailing P/E ahead of its Friday earnings report.
On the date of publication, Joey Frenette held shares of American Express and Apple. 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.
