3 Fintech Stocks That Can Continue to Increase Profits

It’s been a tough couple of months for fintech stocks. The broader market is struggling but still moving forward while some fintech names are actually losing ground…at least as a group. The Global X FinTech ETF (FINX 1.60%) is now trading 15% below its February high, and is back to within striking distance of its March low.

Don’t let this short-term, group-wide withdrawal deter you. Some of the names that were dragged into this sale represent companies that are still growing their profits. This weakness is ultimately a buying opportunity for select fintech stocks. Here’s a closer look at three of the top prospects among these tickers.

1. PayPal

It’s an oldie but a goodie. Actual, PayPal (PYPL 0.96%) can be considered the original financial technology outfit. It launched its online payment platform in 1998 when the internet itself was young.

The company has used all that time well. During the last quarter of last year, 435 million regular PayPal account holders collectively used the platform more than 6 billion times to purchase nearly $360 billion worth of goods and services. Range is not a problem. It remains the Western world’s largest single digital wallet service, by a country mile, in fact.

This size and age has worked against the stock since mid-2021, when the tailwinds created by the COVID-19 pandemic began to diminish. It was also when investors renewed interest in cryptocurrencies and alternative digital payment services. The world often thinks it wants “something new” without considering the possibility that older solutions are often still the best solutions. That’s largely why PayPal shares are now down a whopping 76% from their peak in 2021. Yep.

However, the stock’s rout has slowed to a crawl and could be poised to reverse course for one simple reason: Through all the recent turbulence and despite the arrival of more alternatives, PayPal continues to expand. Last year’s top line was up 10%, and analysts believe revenue will grow nearly 7% this year before accelerating to a growth rate of more than 9% next year. The income grows accordingly.

There is a lot to be said for size, and being already established.

2. SoFi technologies

SoFi technologies (SOFI 1.83%) is not right for everyone’s portfolio. The online bank has been in the red since its inception in 2011. And the company is expected to remain in the red throughout this year. Some investors just need the certainty that only established, profitable companies can provide.

For other investors, however, hockey great Wayne Gretzky’s key to success in his sport also applies to stock picking. As Gretzky explained, “I skate to where the puck is going to be, not where it’s been.” Translation for investors? Shares reflect the company’s plausible future rather than its past. Act accordingly.

To that end, know that while SoFi is expected to log another loss this year, it should be the last of them. The analyst community is calling for a swing to a profit of $0.03 per share next year, which isn’t much, but it’s still an important milestone. Additionally, based on the company’s revenue and EBITDA trajectory, analysts are modeling in the range of earnings per share of $0.20 for 2025.

Image source: SoFi Technologies Q4-2022 investor presentation.

Take these views with a large grain of salt. SoFi Technologies is still a work in progress with many different moving parts. Analysts’ best guesses are fair, but not guaranteed to be on target. Recent disruption to the entire banking industry and the specter of a recession are just some of the factors that could lead to results that are dramatically different than expected.

However, look at the bigger picture. SoFi is a glimpse of the future of banking, bringing together checking, savings, investing, lending, credit cards and even insurance into a single platform. People clearly react to it. Still, with just 5.2 million customers, SoFi still has huge room to grow.

3. Intuition

Last but certainly not least, add Intuit (INTU 0.40%) to your list of fintech stocks worth considering because their underlying companies can continue to grow the top and bottom lines.

You can be a customer without realizing it. Intuit is the name behind the tax filing software TurboTax. Intuit also owns the accounting software brand Quickbooks, the personal finance app Mint, CreditKarma and the mailing list management tool Mailchimp. This suite of software is not only highly marketable, but also highly cross-marketable; any future acquisitions are likely to be as well. These other platforms offset the increase in revenue seen during the second quarter of the year when most taxes are filed with the IRS.

Most of Intuit’s products are “rented” rather than outright purchased, generating reliable recurring revenue. (Or, in Mint’s case, the company’s relationships with other financial service providers generate steady referral revenue.)

But growth? How much more can there be for consumer and business software that has been around as long as these have? More than you might think.

Take TurboTax, for example. About 50 million annual U.S. tax filings are made using the service each year, which is less than half the Census Bureau’s figure of 131 million U.S. households (although many of them may be eligible for the platform’s free tax filing options). Many domestic small businesses are also able to use TurboTax to manage their taxes, but they may not be using the option yet. Meanwhile, Intuit reports that there are just over 25 million Mint users. Quickbooks Online also only has a few million customers, and only about 30 million users are reportedly dependent on the installed version of the software. This leaves plenty of room for new customers to join the group.

They seem to be doing just that. Wall Street expects sales to improve 11% this year and next, boosting last year’s per-share bottom line of $11.85 to $13.83 this year on its way to $15.59 per share next year. You can’t ask for much better than that from a software company of Intuit’s size and age.