The 7 best growth stocks in Fintech
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Investing in fintech growth stocks is an excellent strategy for those seeking high returns in the stock market. Fintech companies use technology to disrupt the traditional financial services sector, creating innovative solutions that increase efficiency and accessibility. This disruptive potential can lead to impressive growth, making it an attractive sector for investors with a more aggressive risk tolerance threshold.
Such investors will surely hope that 2023 will be better than 2022, which sent fintech stocks soaring. Payments stocks underperformed the overall S&P 500, which fell more than 19%. That said, this disruptive sector promises better days.
When investing in fintech growth stocks, as with any stock, you need to do your due diligence and research the companies you’re considering. This means looking for companies with strong finances, solid growth potential and a competitive advantage in their niche.
Here are seven fintech growth stocks I think are worth diving deeper into.
ADYYF
Adyen $1,417.00
MELI
MercadoLibre $1220.00
FOUR
Shift4 Payments $64.50
GPN
Global Payments $112.20
TOAST
Toast $18.92
PYPL
PayPal $73.60
FICO
Fair Isaac Corp. $677.39
Adyen (ADYYF)
Source: shutterstock.com/ZinetroN
Adyen (OTCMKTS:ADYYF) is a global payment technology company that provides a simplified platform for accepting payments anywhere in the world. The company helps businesses increase revenue by offering customer payment solutions across multiple channels and devices. These solutions include a variety of payment methods and currencies, as well as fraud prevention and data analytics tools to help their customers.
The company recently released its results for the full fiscal year 2022. Most metrics indicate that the company continues to experience strong overall growth, making it a reasonable investment.
Adyen processed €767.5 billion in payments for the full year, representing an increase of 49% year-on-year. This resulted in 1.3 billion euros in total revenue, up 30% compared to the same period last year.
Adyen recorded solid growth in North America and Asia, and the shares have several hundred dollars of upside over today’s price. The company has hubs in Singapore, Chicago, San Francisco, Madrid and Sao Paolo.
MercadoLibre (MELI)
Source: rafapress / Shutterstock.com
Latin American e-commerce company MercadoLibre (NASDAQ:MELI) offers various fintech offerings in Latin America. The company offers payment processing, digital wallets and other financial services. These services allow users to make payments, send money and access credit in markets that may otherwise be underserved.
The company and its fintech platform have become very popular in Latin America, where traditional banking services are less accessible. The company’s high-quality offering has contributed to the regional growth and success.
Mercadolibre’s recent earnings report highlights the firm’s fintech success. Unique active users reached 44 million in the fourth quarter, representing a 27% year-over-year increase. MercadoLibre also brought in $36 billion in total payment volume in Q4, up 45% over the same time frame. Notably, more than $25 billion of this volume was off-platform. The company’s POS (point of sale) business has expanded rapidly, with $25 billion in payment volume representing 51% year-over-year growth.
The company’s strong growth across an underserved Latin American payments landscape provides excellent upside for long-term investors.
Shift4 Payments (FOUR)
Source: Shutterstock
Another upcoming fintech stock, Shift4 Payments (SNEEZE:FOUR) provides payment processing solutions and related services. The company’s offerings include contactless payments, gift cards, loyalty programs and advanced security and fraud prevention tools. Shift4 Payments also offers a variety of software integrations to support businesses in a variety of industries.
FIRE stock has been relatively stable over the past year, price-wise, but it still offers about 15% upside according to analysts.
Shift4 Payments serves more than 200,000 current partners across the US, Canada, Japan and Europe, processing over $200 billion in transactions annually.
One of the more exciting developments from the company is the recent collaboration with self-checkout company Mashgin. Mashgin’s kiosks are equipped with computer vision-enabled cameras that allow users to place all their items on kiosk trays and have them instantly turned up.
Mashgin’s stadium kiosks have seen sales increases between 25%-400%, and the partnership promises to significantly increase Shift4 Payments’ overall processing volume over the long term.
Global Payments (GPN)
Source: Shutterstock
Global Payments (SNEEZE:GPN) provides similar offers to the companies on this list. The company is a leading provider of a comprehensive suite of payment processing solutions and related services, including point-of-sale systems, online payments and fraud prevention tools.
However, unlike the other stocks listed above, GPN stock is not experiencing strong growth. Instead, 2022 revenue rose a modest 5.2% to reach $8.975 billion. It was more of the same in the fourth quarter, with revenue growth of 2.7% year-over-year. Fortunately, Global Payments’ net income grew 19.1% to $258.56 million — a bright spot for the company overall.
However, Global Payments has a clear path towards growth with the acquisition of EVO Payments (NASDAQ:EVOP) is expected to be completed at the end of March. This acquisition will increase the firm’s addressable markets and strengthen the current portfolio of B2B payment solutions.
Global Payments is moving towards business customers and away from consumer-focused businesses, with plans to sell two businesses soon.
Toast
Source: TonelsonProductions / Shutterstock.com
Some fintech stocks, included Toast (SNEEZE:TOAST), also serves several niche areas in the fintech market. Toast is a cloud-based restaurant management platform that offers a variety of software and hardware solutions to support restaurant operations. The solutions include systems for points of sale, online ordering and delivery management. The company serves a growing customer base nationally and internationally.
Toast is quickly becoming a household name in restaurant payments, with revenue growth of 60% in 2022. However, that impressive growth still didn’t bring Toast’s bottom line out of the red in 2022. The company had a net loss of $275 million. The positive spin is that this net loss was significantly reduced from $487 million in 2021.
Toast expects revenue of $2.731 billion in 2022 to grow to between $3.57 billion and $3.66 billion in 2023. That would represent top-line growth of between 30.7% and 34%. The company also expects as much as $30 million in EBITDA, meaning it will still produce a net loss in 2023 based on management’s expectations.
PayPal (PYPL)
Despite its size and prominent name, PayPal (NASDAQ:PYPL) remains a notable fintech growth stock to buy. It may be a cutting-edge name in the payments space, but that doesn’t mean it’s a dinosaur that can’t keep up.
It is more established than other names on this list. And as a consequence, it cannot boast the dramatic growth of several other stocks above. That said, PayPal reported meaningful top-line growth in Q4 and FY ’22 of 7% and 8%, respectively.
Of particular importance to fundamentals-based investors, PayPal’s earnings per share grew 19% in Q4 after falling 41% in 2022. One interpretation of this metric is a reversal of negative momentum and a positive outlook.
PYPL stock has proved volatile this year. It began trading in 2023 at $74.58, rose to nearly $87 to start February, and has since fallen to $73. The positive is that analysts have pegged the target price at over $99, so the growth is certainly there.
Fair Isaac Corp. (FICO)
Source: Teerasak Ladnongkhun/Shutterstock.com
Fair Isaac Corp. (SNEEZE:FICO) provides analysis software and tools. These solutions are used across the banking, insurance and healthcare sectors. Fair Issac provides credit risk assessment, fraud detection and decision management. Most of us know Fair Isaac Corp. for the FICO credit score, which determines individual and business creditworthiness.
It is also a fintech stock worth considering, underpinned by moderate growth. The company’s net income increased 15% in Q4, reaching $97.6 million. Revenues grew by a more modest 6.98% in the same period.
FICO is likely to push fintech leaders to continue defining their AI strategies soon. The company recently released its third annual State of Responsible AI in Financial Services report. The report notes an ongoing rise in demand for AI in fintech, but a lack of transparency. Furthermore, most surveyed companies have only vague ideas about how to define and implement standards for AI across financial services.
FICO can benefit from artificial intelligence if it can improve the accuracy of the credit scores it assigns to individuals and businesses.
At the date of publication, Alex Sirois 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 InvestorPlace.com Guidelines for publication.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in multiple industries from e-commerce to translation to education and leveraging his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.
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