Our Top 3 Fintech Stock Picks for 2023
The allure of a fintech stock is one that is relatively easy to understand. Investors tend to like this group of stocks because of the growth upside they provide. That’s because these companies combine the growth potential of technology along with the stability and easy-to-understand economics of financial companies.
There are also some important secular tailwinds worth considering with this sector. Cash is dying. People don’t act the way they used to, and financial technology solutions are becoming increasingly important. With a big pie that’s only getting bigger, fintech companies stand to reap the benefits of this trend for a long time to come.
For those who enjoy the simplicity and flexibility of paying by phone or transacting online, these companies are among the key players worth considering. As transaction volumes grow, these companies will profit from a fee-based model that scales higher with transaction growth.
Whether it’s online and mobile banking, financial software, peer-to-peer lending, or a host of other services, these top fintech stocks are among the best options to consider. Let’s dive into what these companies are providing for 2023 and beyond.
| SQ | Block | $61.18 |
| PYPL | PayPal | $72.46 |
| ESTABLISHMENT | Upstart | $17.09 |
Block (SQ)
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Kicking off our list of fintech stocks to buy is Block (SNEEZE:SQ), the company formerly known as Square. A company that provides hardware and software solutions for merchants looking to simplify payments, Block has surged alongside the growth of omnichannel retailers, especially post-pandemic.
As of late, Block is actually a company that has performed relatively well. Last Wednesday, this stock rose by 9% in the middle of the day alone. This is partly due to an increase in interest around growth-sensitive names that could benefit from a slower pace of interest rate increases going forward.
Interestingly, the degree to which SQ stock has moved relative to its peers is noticeable. I think this probably has to do with the company being beaten down to a greater extent than is warranted. Now trading at roughly 2x sales, SQ stock is the cheapest it has been in a long time.
For those betting that the economy won’t absolutely collapse in the next five years, SQ stock looks convincing here. Heading into 2023, this is a top fintech stock to keep an eye on.
PayPal (PYPL)
Source: Michael Vi / Shutterstock.com
Another top-rated fintech company, PayPal (NASDAQ:PYPL) remains among our list of best fintech stocks to buy for a reason.
This company’s services are what many would call universal. Almost every company that does any kind of online business probably uses PayPal for their payment technology. Consequently, the massive and wide market PayPal serves makes this company appealing to investors who want to play the sector as a whole.
PayPal is also a company that has not been afraid to put its money where its mouth is. The company has made several acquisitions, bringing in the likes of Venmo, Xoom, Honey, Bill Me Later etc., to further expand its user base.
As of 2021, PayPal’s revenue was over $25 billion. PayPal is arguably the most used payment app out there. Consequently, the company is a crucial growth stock for many long-term investors who want to play the fintech space. As the company’s income increases over time, the company’s valuation should also increase.
Profitability has been the main problem with PayPal lately. That said, I expect the company to break even in the coming quarters, assuming we see a stabilization of the markets next year.
Upstart (UPST)
Source: Postmodern Studio / Shutterstock.com
A leading AI-powered lending platform, Upstart (NASDAQ:ESTABLISHMENT) was one of the high-flyers of 2021. When it comes to powerful fintech stocks, Upstart is probably a name most investors should be aware of.
Currently falling from grace, previously trading around an all-time high around $400 (now below $18), this is a company many may have lost faith in. In fact, this kind of fall is one that is hard to swallow for many investors, who may now see the company as “uninvestable”.
That said, there’s a reason Upstart is on this list. With this significantly reduced valuation, UPST stock now looks very attractive. Lending activity may remain sluggish for some time. However, the start-up’s reach into various loan sectors is what I believe can provide stability in difficult times. Whether it’s car loans, personal loans or other offers, Upstart’s technology makes the lending process much simpler and easier for lenders. Anything that can increase the lending volume in the long term is something the clientele wants.
Although there is economic turmoil, I believe Upstart’s solutions will still be in demand. While 2023 could be another tough year, it’s hard to see a scenario where most of the potential bad news isn’t already priced in. Therefore, I think now may be the time to be bullish on UPST stock.
As of the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the InvestorPlace.com Publishing Guidelines.
