With macro issues putting pressure on the overall market once again, now may be a great time to buy fintech stocks on weakness. While it’s unclear as to how long this latest round of volatility may last, there are currently several names in this space worth considering.
As one would expect, many of these fit best in the growth stocks category. Although trading at a high multiple of current earnings, taking expected growth into account, several of them are more-than reasonably priced.
However, that’s not to say value investors can’t find fintech opportunities for their portfolios. There are also quite a few of these stocks currently trading at low multiples. The same near-term issues (high inflation, high interest rates) weigh these stocks down that continue to loom over the market-at-large.
So, what are the top fintech stocks to buy in August 2023? These seven belong at the top of your list. Each one has strong long-term potential, and currently trades at a “can’t miss” price.
Shift4 Payments (FOUR)
Shift4 Payments (NYSE:FOUR) is a name that I’ve previously argued as being one of the fintech stocks to buy.
As its corporate name may suggest, this company is a provider of payment technology services. Shift4 focuses mainly on providing such services to the e-commerce and hospitality sectors.
Shift4 has continued to report strong growth, despite the current U.S. economic slowdown. Last quarter, gross revenue increased by 26% compared to the prior year’s quarter, and earnings more doubled. Per sell-side forecasts, earnings for 2023 should come in at $2.63 per share this year.
In 2024 and 2025, earnings per share could rise to $3.36 and $4.32, respectively. With FOUR stock selling for less than 21 times forward earnings, with the potential for further double-digit earnings growth, if you’re looking for a “growth at a more-than-reasonable price” sort of play among fintech, Shift4 remains a strong choice.
Green Dot (GDOT)
It’s understandable if, at first glance, you are skeptical about Green Dot’s (NYSE:GDOT) bonafides as a cutting-edge fintech.
Yet while this digital-first bank and prepaid debit card provider may not be growing as quickly as some more “disruptive” names, GDOT’s low valuation helps to more than make-up for it.
At today’s prices, GDOT stock trades for only 8.1 times forward earnings. Not only that, while not in turbo-growth mode, don’t discount the potential for Green Dot to capitalize on fintech trends in the coming years.
As InvestorPlace’s Muslim Farooque wrote back in March, the company has great growth potential in areas like business-to-business (or B2B) services.
In the near-term, concerns about the economy (and its impact on consumer finances) may keep weighing on GDOT. However, already a great buy on weakness today, any further pullback may make it an even stronger opportunity for value investors.
Nerdwallet (NRDS)
Down more than 50% since its stock market debut less than two years ago, Nerdwallet (NASDAQ:NRDS) may not exactly sound like one of the best fintech stocks.
Shares in the company, which is essentially a lead generator for the financial services industry, initially tanked during the 2022 stock market sell-off.
While NRDS stock briefly spiked earlier this years, shares have fallen back near their all-time lows once again. However, while sentiment may be weak today, as a Seeking Alpha commentator recently argued, this could soon improve in a big way, for two reasons.
First, Nerdwallet has the potential to wring out growth and cost synergies, if it continues to make bolt-on acquisitions of similar platforms.
Second, the company may have a greater ability to improve margins than the market today currently gives it credit. Both these factors could lead to improved results, and a massive rebound for NRDS shares.
PagSeguro Digital (PAGS)
Shares in Brazil-based fintech PagSeguro Digital (NYSE:PAGS) have been hard hit over the past two years. Changing hands for prices nearing $60 per share in August 2021, PAGScosts less than $10 today.
But while macro uncertainty in the company’s home market continues to weigh on shares, this key risk may be more than baked into the PAGS stock price. Shares in this payment technology provider trade for only 8.2 times earnings, and a rebound may not be too far away.
Earlier this month, analysts at UBS upgraded PagSeguro Digital stock, citing monetary easing in Brazil as something that bodes well for the company, and for shares. Along with an upgrade, the UBS analysts gave PAGS a price target of between $12 and $14 per share. If UBS’s bull case plays out, it could mean an upside of between 45.5% and nearly 70%.
Payoneer Global (PAYO)
Payoneer Global (NASDAQ:PAYO) is a global provider of money transfer and digital payment services.
The company has experienced strong growth over the past few years, and it has scaled to the point of profitability.
However, the current global economic challenges, coupled with the prospect of limited earnings growth between 2023 and 2024, has resulted in PAYO stock trading sideways over the past year, after plummeting during 2021 and 2022. Still, the stock has kicked off a rebound in recent months.
Said rebound may have the potential to continue. As headwinds clear up, and Payoneer’s move into new markets/services begins to pay off, Payoneer could experience a growth resurgence starting in 2025 (based on sell-side earnings forecasts).
While not cheap at 27.8 times forward earnings, consider PAYO one of the top fintech stocks, as a return to the growth fast lane may result in substantially higher prices.
PayPal Holdings (PYPL)
PayPal Holdings (NASDAQ:PYPL) is another solid value play among fintechs. It trades at only 12.3 times forward earnings. Yes, there is some explanation for PYPL’s current discounted valuation.
Growth has slowed down considerably for the payment and digital financial services company.
This is likely to continue. Forecasts call for revenue growth of around 9.2% next year. That’s a far cry from PayPal’s more than 20% revenue growth in 2020. Still, even if its days as a high-flier are behind it, PYPL stock isn’t doomed to experience middling returns from here.
While the market is mixed about PayPal’s cost-cutting initiatives, this could have a greater impact on the bottom line in the years ahead. Couple that with some moderate multiple expansion (like, say, from 12.3x to 15x), and shares could (albeit slowly) rise to to prices well above present price levels (around $61 per share).
SoFi Technologies (SOFI)
In past articles on SoFi Technologies (NASDAQ:SOFI), I’ve argued why I consider it one of the most promising fintech stocks.
Largely, due to its potential to continue growing at a double-digit pace, as this fintech/neobank successfully gains market share from young, affluent customers.
The prospect of continued growth makes up a great deal of the current valuation of SOFI stock. However, achieving steady growth isn’t yet completely priced into shares.
If SoFi finally reaches the point of GAAP profitability later this year (as anticipated), this could help shares get back on track.
On a longer timeframe, as SoFi’s earnings swing to substantially higher levels, a return to prior prices (like $15, or even $20 per share) may be within reach.
This makes SOFI worthy of consideration at current prices (around $8.15 per share), and a fintech well worth buying, if shares experience any further weakness.
On the date of publication, Thomas Niel did not hold (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.
