3 Fintech stocks to avoid in late 2022
The rise of fintech companies has caused a radical shift in how we make payments, borrow money, insure and manage wealth. However, 2022 has been a challenging year for fintech companies as venture capitalists have scaled back their investments in the sector.
In the third quarter of fiscal year 2022, global fintech funding fell 38 percent quarter over quarter to reach $12.90 billion – similar to fiscal 2020 levels in the fourth quarter.
The prevailing high inflation and aggressive rate hikes by the Fed have set a discouraging tone for investors. Fintech stocks are incredibly volatile as they are sensitive to interest rates. Investors’ declining interest in fintech stocks is evident from the ARK Fintech Innovation ETFs (ARKF) 68.8% decrease so far this year.
Amid this backdrop, fundamentally weak fintech stocks are expected to remain under pressure in the coming months. Therefore, Block, Inc. (SQ), Marathon Digital Holdings, Inc. (MARA), and Paymentus Holdings, Inc. (PAY) is best avoided now.
Block, Inc. (SQ)
SQ creates tools that enable merchants to accept card payments and provides next-day reporting, analysis and settlement. It offers various hardware products, software products and a developer platform.
SQ’s total liabilities increased 7.5% to $12.59 billion for the third quarter ended September 30, 2022, compared to $11.71 billion for the fiscal year ended December 31, 2021. The company’s total operating costs increased 45.5% year over year to $1.61 billion. Net loss attributable to common stockholders came in at $14.71 million, compared to net income of $84K a year ago.
Also, net loss per share came in at $0.02. Net cash provided by operating activities for the nine months ended September 30, 2022, fell 80% year-over-year to $130.53 million.
SQ’s EPS for the quarter ending December 31, 2022 is expected to decline 0.1% year-over-year to $0.27. Over the past year, SQ has fallen 70.3% to close last trade at $67.40.
SQs POWR Ratings reflecting the weak outlook. The share has an overall rating of D, which corresponds to a sell in our proprietary rating system. POWR Ratings evaluates stocks based on 118 different factors, each with its own weighting.
Within F-rated Financial services (business) industry, it is ranked #79 out of 106 stocks. The company has a D grade for momentum, stability and quality.
click here to see the additional ratings of SQ for Growth, Value and Sentiment.
Marathon Digital Holdings, Inc. (MARA)
Marathon Digital Holdings, Inc. operates as a cryptocurrency mining digital asset technology company focused on the blockchain ecosystem and digital asset generation in the United States.
For the fiscal third quarter ended September 30, 2022, MARA’s revenue fell 75.4% year over year to $12.69 million. Net loss increased 240.2% year over year to $75.42 million. Adjusted EBITDA loss came in at $8.70 million, compared to $78.78 million. In addition, net loss per share increased 195.5% year-over-year to $0.65.
MARA’s EPS for the quarter ending December 31, 2022 is expected to decline 240% year-over-year to $0.14. Revenue is expected to decrease 19.8% year over year to $48.37 million. It has failed to beat Street EPS estimates in each of the last four quarters. Over the past year, the stock has fallen 84.6% to finish last trading at $9.98.
MARA’s weak fundamentals are reflected in the POWR ratings. The stock has an overall rating of F, which means a strong sell in our proprietary rating system. It has an F grade for growth, value, stability, sentiment and quality and a D for momentum.
click here to see all the ratings of MARA.
Paymentus Holdings, Inc. (PAY)
PAY offers cloud-based technology and solutions for invoice payment. The company offers electronic invoice presentation and payment services, business customer communication and self-service revenue management to invoice issuers. The company serves utilities, financial services, insurance, government, telecommunications and healthcare.
For the fiscal third quarter ended September 30, 2022, PAY’s net cash used in operating activities came in at $1.95 million, compared to net cash provided by operating activities of $6.60 million.
The company’s total liabilities increased 58% year-over-year to $137.19 million, compared to $86.81 million for the fiscal year ending December 31, 2021. Additionally, net loss attributable to common stock increased 274.6% to 737,000 dollars. Operating expenses increased 29.1% year over year to $38.77 million.
Analysts expect PAY’s EPS to fall 50% year-over-year to $0.01. Over the past year, the stock has fallen 61.5% to close last trade at $11.68.
PAY’s POWR ratings reflect its bleak outlook. The stock has an overall rating of D, which translates to a sell in our proprietary rating system. It is ranked #82 in the Financial Services (Enterprise) industry. In addition, it has a D grade for momentum, stability and quality.
To see the other reviews of PAY for Growth, Value, and Sentiment, click here.
SQ shares were trading at $71.54 a share Friday afternoon, up $4.14 (+6.14%). So far this year, SQ has fallen -55.71%, compared to a rise of -15.14% 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…
