Nuvei and StoneCo have solid income

Despite negative investor sentiment hitting global banking stocks following this week’s collapse of Silicon Valley Bank, the latest financial results from Nuvei, SentinelOne and StoneCo indicate that fintech and the financial services industry are weathering strong macroeconomic headwinds.

– Nuvei, SentinelOne and StoneCo report robust revenue growth.

– Nuvei is past the worst crypto-related headwind; SentinelOne expects cybersecurity spending to remain a priority.

– The Global X Fintech ETF, which owns Nuvei and StoneCo, is up 3.7% so far this year.

As the earnings season ends, Nuvei will [NVEI]SentinelOne [S] and StoneCo [STNE] has delivered its results for the fourth quarter (Q4). The three companies have exposure to both fintech and the financial industry.

Canadian payment platform Nuvei got the ball rolling last week. Revenue rose 4% year over year to $220.3 million, missing the $221.8 million expected by analysts polled by Refinitiv. However, adjusted earnings per share were $0.47 versus expectations of $0.43 per share.

Reporting after the market closed on Tuesday, March 14th, cybersecurity firm SentinelOne beat both top and bottom line estimates: EPS of -$0.13 on revenue of $126.1 million vs. -$0.16 on $124.7 million expected by analysts, according to Gasoline.

Brazilian fintech StoneCo, which also reported on Tuesday, posted revenue growth of 44.5% as it swung to an adjusted net profit from a loss in the previous quarter

Nuvei shares have jumped 60.9% so far this year and are up 25% in the last week alone. SentinelOne stock is down 0.8% year-to-date and down 13.1% in the past month. The StoneCo share is down 3.7% and down 6.9% in the respective periods.

Strong growth amid a challenging macro environment

Despite Nuvei’s top-line pace in the October to December period, revenue growth had been “adversely impacted by year-over-year changes in exchange rates and volatility from digital assets and cryptocurrencies”, the Canadian fintech firm said in its earnings release. .

Revenue excluding digital assets and crypto increased 26% year-over-year to $209.6 million from $165.7 million in Q4 2021. Guidance for fiscal 2023 is for revenue excluding digital assets and crypto to grow between 23% and 28%.

SentinelOne had strong customer growth, adding 750 new customers in the fourth quarter, an increase of approximately 50% year over year. The number of clients bringing in annual recurring revenue of $100,000 or more was up 74% to 905.

There was also “extremely strong” retention and expansion among existing customers, “which proved resilient despite tight macroeconomic conditions”. Net storage revenues increased by 130% year-on-year, well above the company’s long-term target of 120%.

StoneCo’s revenue growth was mostly down to a 49.3% jump in sales from its financial services platform. The company has worked hard to expand its range of banking services and help older banks upgrade outdated systems.

“The fourth quarter consolidated a major turnaround that our business had during 2022,” said StoneCo chief strategy officer Lia Matos Reuters.

Well positioned to navigate upwind

Nuvei’s robust Q4 results were cheered by Credit Suisse analysts, who upgraded the stock from “neutral” to “outperform”. In a note to clients, they argued that Nuvei should be past “the bulk of cryptocurrency-related headwinds”. The bank had previously downgraded the share to “neutral” in July in light of the challenging macro backdrop. The new price target on Nuvei’s stock is $45, indicating a 10.1% upside from the last close of $40.89.

However, macro-related uncertainties can affect corporate spending. SentinelOne expects cyber security to remain “a top IT priority, driven by a fierce and evolving threat landscape”. Revenue growth is expected to be 75% in the 1st quarter of 2024 and 51% for the entire financial year midway through.

A new CEO will take the helm of StoneCo this month. Pedro Zinner “has more than 25 years of experience in management, strategy, risk management and finance, and he will bring a powerful vision to drive the next phase of value creation for our business,” outgoing CEO Thiago Piau said in a statement.

Fund in focus: Global X Fintech ETF

Both Nuvei and StoneCo are owned by the Global X Fintech ETF [FINX], with weights of 0.93% and 0.89% respectively, as of Tuesday. The fund is up 3.7% so far this year, but down 9% in the last month.

StoneCo has been allocated 1.95% of the SoFi Gig Economy ETF [GIGE] starting Wednesday. The fund is up 15.8% so far this year, but down 8.7% in the last month.

SentinelOne is held by several large cybersecurity-focused funds. The stock makes up 3.15% of the Global X Cybersecurity ETF [BUG] as of Tuesday, which is up 6.7% year-to-date and down 5.1% in the past month.