3 Fintech stocks to add to your watchlist this fall and 1 to avoid

The fintech industry has grown significantly in recent years due to the pandemic-driven accelerated pace of digitization. Continued digitization of businesses and financial transactions should continue to drive the industry’s growth. Thus, investors can add promising fintech stocks Visa (V), AssetMark Financial (AMK) and Regional Management (RM) to their watchlists. However, macroeconomic uncertainty is currently weighing on investor sentiment around fintech stocks. Therefore, you may want to avoid PayPal (PYPL), given its fundamental weakness. Let’s discuss….

Fintech companies have become increasingly popular in recent years due to their convenience in conducting financial transactions. The COVID-19 pandemic accelerated the adoption of fintech as it met consumers’ ever-increasing demand for easy payment, money management and access to easy credit.

The industry’s growth is driven by recent trends such as buy-now-pay-later (BNPL), neo banks and platform-as-a-service (PaaS). According to a Vantage Market Research report, the global fintech market is expected to grow by a CAGR of 19.8% to $332.50 billion by 2028.

However, fintech stocks have been under pressure since the start of the year due to the Fed’s hawkish monetary stance. With inflation rising more than expected in August, the central bank announced its third consecutive 75 basis point interest rate hike last week.

The Fed has also guided for further aggressive rate hikes in the coming months. This is expected to weaken investor confidence in fintech companies. Fintech stocks’ decline from the premium valuations they commanded during the peak of the pandemic is evident from the ARK Fintech Innovation ETFs (ARKF) 60.4% decrease so far this year.

Therefore, we think it might be wise to get rid of the fundamentally weak fintech stock PayPal Holdings, Inc. (PYPL). However, investors can reasonably add promising industry participants Visa Inc. (V), AssetMark Financial Holdings, Inc. (AMK), and Regional Management Corp. (RM) to their watchlists to cash in on the industry’s long-term growth prospects.

Stocks to watch:

Visa Inc. (V)

V operates as a payment technology company that facilitates digital payments among consumers, merchants, financial institutions, businesses, strategic partners and public entities. It operates VisaNet, a transaction processing network that enables the authorization, clearing and settlement of payment transactions. In addition, the company offers card products, platforms and value-added services.

On March 10, 2022, V announced that it had completed the acquisition of the open banking platform Tink. Tink enables financial institutions, fintechs and merchants to build financial products and services and move money.

Visa Europe CEO Charlotte Hogg said: “Digital tools are driving the new economy and the combination of Visa and Tink will support greater choice and the quality of digital money services as the lines between commerce, financial services and payments continue to converge.”

V’s net revenue increased 18.7% year-over-year to $7.28 billion for the third quarter ended June 30, 2022. The company’s non-GAAP net income increased 29% year-over-year to $4.20 billion. Its non-GAAP EPS came in at $1.98, representing a 33% year-over-year increase. Operating income also rose 2.1% year over year to $4.14 billion.

For the quarter ending September 30, 2022, V’s EPS and revenue are expected to increase 15.3% and 15.4% year-over-year to $1.87 billion and $7.57 billion, respectively. It beat consensus EPS estimates in each of the last four quarters. Over the past three months, the stock has fallen 9.6% to close the last trade at $179.18.

V’s POWR Ratings reflects this promising view. The share has an overall B rating, which corresponds to a buy in our proprietary rating system. The POWR ratings are calculated by considering 118 different factors, with each factor weighted optimally.

It has a B grade for stability and quality. Within the same industry, it is ranked #9. To see the other ratings for Growth, Value, Momentum and Sentiment, click here.

AssetMark Financial Holdings, Inc. (AMK)

AMK offers wealth management and technology solutions in the USA. It offers an open architecture product platform, customer service, asset allocation options, practice management, support services and technology for the financial advisor channel.

AMK’s total revenue increased 18.1% year-over-year to $151.20 million for the second quarter ended June 30, 2022. The company’s adjusted EBITDA increased 24% year-over-year to $49.63 million. Also, its adjusted net income rose 22.1% year over year to $32.42 million. Additionally, its adjusted EPS came in at $0.44, representing a 22.2% year-over-year increase.

Analysts expect AMK’s EPS and revenue for the quarter ending September 30, 2022 to increase 5.5% and 10.2% year-over-year to $0.42 million and $111.76 million, respectively. It beat Street EPS estimates in three of the past four quarters. Over the past three months, the stock has fallen 4.5% to close last trade at $18.64.

AMK’s POWR ratings reflect this solid outlook. The share has an overall rating of B, which corresponds to a buy in our proprietary rating system.

It has a B grade for growth, stability and sentiment. Again, it is ranked number 6 in the same industry. click here to see the other ratings of AMK for value, momentum and quality.

Regional Management Corp. (RM)

RM, a diversified consumer finance company, offers a wide variety of installment loan products to customers in the United States. They have limited access to consumer credit from banks, thrifts, credit card companies and other lenders. It provides small and large installment loans, as well as retail loans, to help with the purchase of furniture, appliances and other retail items.

In June, with the dedication of its first branch in Merrillville, RM announced the expansion of its operations in Indiana, its 15th.th United States state. The new position strengthens RM’s de novo foothold in the Midwestern United States. RM President and CEO Robert W. Beck said, “We are very excited to bring our suite of affordable financial solutions to Indiana for hard-working Hoosiers.”

For the second fiscal quarter ended June 30, 2022, RM’s revenue increased 23.3% year over year to $122.87 million. The company’s total assets increased 29.9% year over year to $1.54 billion.

Analysts expect RM’s revenue for the quarter ending September 30, 2022 to be up 22% year-over-year to $125.97 million. It beat Street EPS estimates in each of the four trailing quarters. Over the past month, the stock has lost 20.9% to end its last trade at $29.06.

RM’s POWR rating reflects this promising outlook. The share has an overall rating of B, which corresponds to a buy in our proprietary rating system.

It has an A grade for value and a B for quality. It is ranked first in the Consumer Financial Services industry. To see RM’s additional ratings for Growth, Momentum, Stability and Sentiment, click here.

Stocks you should avoid:

PayPal Holdings, Inc. (PYPL)

PYPL is a digital payment company that enables digital payments on behalf of consumers and merchants. The combined payment solutions comprise the payment platform, including PayPal, PayPal Credit, Braintree, Venmo, Xoom, iZettle and Hyperwallet products and services.

PYPLs operating margin came in at 19.1% for the second quarter ended June 30, 2022, compared to 26.5% in the same period last year. The company’s non-GAAP net income fell 21% year over year to $1.08 billion. Its non-GAAP EPS came in at $0.93, representing a 19% year-over-year decline.

Analysts expect PYPL’s EPS for the quarter ending September 30, 2022 to fall 14.4% year-over-year to $0.95. Over the past year, the stock has fallen 65.2% to close last trade at $91.12.

PYPL’s weak fundamentals are reflected in the POWR ratings. The share has an overall D rating, which corresponds to a sell in our proprietary rating system.

It is ranked No. 41 out of 50 D-rated stocks Consumer Financial Services industry. click here to see more of PYPL’s component grades.

V shares were trading at $179.36 a share Thursday morning, up $0.18 (+0.10%). So far this year, V has fallen -16.80%, against an increase of -23.08% in the benchmark S&P 500 over the same period.

About the Author: Dipanjan Banchur

Since he was in primary school, Dipanjan was interested in the stock market. This led to him taking a master’s degree in finance and accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing new trends in the financial markets.

More…

The mail 3 Fintech stocks to add to your watchlist this fall and 1 to avoid appeared first StockNews.com