3 Fintech stocks to avoid or sell short until further notice
The COVID-19 pandemic made fintech companies very popular as they made credit, payments, lending and many more financial activities available on tap. However, this year has been challenging for the industry, with the Fed raising interest rates aggressively to curb rising inflation.
Fintech stocks have met a similar fate to technology stocks as investors shifted their attention away from these high-growth names. Investors’ declining interest in fintech stocks is evident from the ARK Fintech Innovation ETFs (ARKF) 61.5% decrease so far this year.
As the economy is expected to witness a recession next year, fundamentally weak fintech stocks Block, Inc. (SQ), SoFi Technologies, Inc. (SOPHIE), and Paymentus Holdings, Inc. (PAY) could see further disadvantages. So investors should avoid these stocks or sell them short.
Block, Inc. (SQ)
SQ and its subsidiaries create tools that enable merchants to accept card payments and provide next-day reporting, analytics and settlement. It offers various hardware products, software products and a developer platform.
SQ’s total net income fell 5.9% year-over-year to $4.40 billion for the second quarter ended June 30, 2022. Its adjusted net income increased 56.7% year-over-year to $110.74 million. The company’s adjusted EBITDA fell 47.9% year over year to $187.34 million. In addition, it is adjusted EPS came in at $0.18, which represents a decrease of 63.3% from the previous quarter.
SQ’s EPS for the quarter ended September 30, 2022, is expected to decline 38% year-over-year to $0.23. Over the past year, the stock has fallen 78.1% to finish last trading at $54.64.
SQs POWR Ratings reflects a gloomy outlook. The stock has an overall rating of D, which corresponds to 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 #90 out of 106 stocks. The company has a D grade for momentum, stability, sentiment and quality.
click here to see the other POWR ratings of SQ for Growth and Value.
SoFi Technologies, Inc. (SOPHIE)
SOFI delivers digital financial services through three segments: Lending, Technology Platform and Financial Services. The company offers lending and financial services and products, so that members can borrow, save, spend, invest and protect their money. It also offers student loans, personal loans for debt consolidation and home improvement projects, and home loans.
SOFI’s total liabilities increased 130.7% to $10.33 billion for the third quarter ended September 30, 2022, compared to $4.48 billion for the fiscal year ended December 31, 2021. Total interest expense increased 89, 3% year-over-year to $40.19 million. The company’s net loss increased 147% year over year to $74.21 million. In addition, loss per share increased 80% year-over-year to $0.09.
SOFI’s EPS for the quarter ending 31 December 2022 is expected to remain negative. Over the past year, the stock has fallen 77.4% to finish last trading at $5.12.
SOFI’s weak fundamentals are reflected in the POWR ratings. The stock has an overall F rating, which means a strong sell in our proprietary rating system. It is ranked #104 out of 106 stocks in the same industry. It has an F grade for stability and quality and a D for growth, value and momentum.
We have also given SOFI a grade for Sentiment. Get all SOFI rankings here.
Paymentus Holdings, Inc. (PAY)
PAY offers cloud-based technology and solutions for invoice payment. The company offers electronic invoice presentation and payment services (EBPP), business customer communication and self-service revenue management to invoice issuers. The company serves utilities, financial services, insurance, government, telecommunications and healthcare.
For the second fiscal quarter ending June 30, 2022, PAY’s total operating expenses increased 53.1% year-over-year to $38.05 million. Net loss attributable to common stock increased 658.8% year-over-year to $2.45 million. Net cash from operating activities fell 31.1% year-over-year to $3.84 million.
Additionally, its adjusted EBITDA came in at $5.01 million, representing a 39.8% decrease from the prior quarter.
Analysts expect PAY’s EPS for the quarter ending December 31, 2022 to fall 44.7% year-over-year to $0.01. Over the past year, the stock has fallen 60.7% to finish last trading at $10.45.
PAY’s POWR rankings reflect this bleak outlook. The stock has an overall rating of D, which translates to a sell in our proprietary rating system. It is ranked #93 in the Financial Services (Enterprise) industry.
In addition, it has a D grade for growth, momentum, stability and quality.
To see the other reviews of PAY for Value and Sentiment, click here.
SQ stock was trading at $54.18 per share on Thursday afternoon, down $0.46 (-0.84%). So far this year, SQ has fallen -66.45%, compared to a rise of -20.56% 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…
