Which Fintech stock can come out stronger from the recent sale?

Rising inflation, high interest rates and geopolitical tensions continue to drag down the broader market, especially growth stocks. Last week’s US inflation data further frightened investors as the consumer price index rose 8.6% year-on-year in May, marking the highest increase since December 1981. Several stocks in fintech, which benefited from pandemic tailwinds, are now deep in The red side investors are concerned about the impact of an impending recession and a decline in consumer discretionary spending.

Increasing competition in the fintech area is also worrying, with the start-up of technology giants such as apple (NASDAQ:AAPL) and Amazon.com (NASDAQ:AMZN) is trying to seize growth opportunities in the digital payment area.

In the midst of this macro headwind and growing competition, using the TipRanks Stock Comparison tool, I placed the following stocks against each other to select the fintech stock that could provide higher returns after the recent sale:

Fintech Stocks: PayPal Holdings (PYPL)

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Fintech giant PayPal (NASDAQ:PYPL) lowered its year-round guidance with reference to further deterioration of the macro-environment, global insecurity in the midst of the war between Ukraine and Russia, incremental inflation, as well as supply chain pressures and normalized e-commerce spending after the reopening of the economy.

That said, PayPal is optimistic about its growth prospects and focuses on driving higher engagement among its existing customer base while continuing to add higher value accounts.

PayPal continues to offer innovative solutions for conducting multiple transactions on its platform. The company recently announced that its US users will now be able to transfer cryptocurrencies between PayPal and other wallets and exchanges. It also focuses on Venmo peer-to-peer payment service, which now has around 83 million US accounts.

Recently, Mizuho Securities analyst Dan Dolev revealed that the company’s proprietary survey indicated that Venmo and Apple Pay users have a strong appetite for using loss-to-pay if Apple opens up its Near Field Communication (NFC) to Venmo. The analyst estimates that this feature can provide a revenue upside of 15% to 20% and almost 10% total gain for payment volume for Venmo.

Points to Apple’s recently announced loss-to-pay partnership with Block (SNEEZE:SQ), Dolev feels that the chances of Apple gradually opening up its NFC to Venmo are “potentially on the rise.” Dolev has a “buy” rating on PayPal with a price target of $ 120.

In total, PayPal achieves a “strong buy” consensus rating based on 26 “buys”, five “hold” and one “sale”. The average PayPal price target of $ 127.07 implies 73.45% upside potential from the current level.

Block (SQ)

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Block (SNEEZE:SQ), formerly known as Square, includes the Cash App, the company’s peer-to-peer payment system, and Square, an ecosystem focused on merchants. The company changed its name last year to reflect the growth beyond the sales business to lucrative areas such as blockchain. With the acquisition of Afterpay earlier this year, Block added a “buy now, pay later” platform to its offerings.

Block’s results for the first quarter fell short of analysts’ expectations due to a decline in Bitcoin (BTC-USD) revenues. However, the Cash App delivered solid performance during the quarter. Excluding contributions from Afterpay, Cash App’s gross profit in the first quarter increased by 17%.

Block revealed that the monthly commitment on the Cash App was the strongest in March. It was driven by solid use of banking products, including the Cash App card. In addition, the company’s comment on the business in April was positive, with gross profit (excluding post-payment) expected to grow above 15% for the Cash App as well as Square.

Last month, Truist Financial (SNEEZE:TFC) analyst Andrew Jeffrey cut his block price for the Block stock to $ 145 from $ 165 to reflect diminished valuations, but kept his “buy” rating. Jeffrey believes that the company’s business model, total addressable market and growth trajectory are not well understood, which provides an opportunity for long-term growth investors to buy the stock.

Jeffrey believes that Block can emerge as one of the world’s most prominent fintechs, competing Visa (SNEEZE:V).

All in all, Block gets a “strong buy” consensus rating with 28 “buy” and six “hold”. At $ 144.48, the average block price target suggests 130.65% upside potential from current levels.

Fintech shares: SoFi Technologies (SOFI)

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SoFi (NASDAQ:SOFI) is a lending and financial services platform that won a national banking charter earlier this year through the acquisition of Golden Pacific. Operating as a bank can increase SoFi’s profitability, as it can use member deposits to finance loans instead of borrowing money from other financial institutions at a higher interest rate. In addition, SoFi can now keep loans on the balance sheet for longer periods, which means that it can earn more interest.

Despite better-than-expected first-quarter earnings and a smaller loss, SoFi’s shares have plunged massively due to macro headwinds and President Joe Biden’s administration decision to extend the federal student loan moratorium until August 31, 2022.

After the results for the first quarter, Piper Sandler analyst Kevin Barker upgraded SoFi to a “buy” from a “hold”, but lowered the price target to $ 10 from $ 12. The analyst points to the recent sale of the stock and feels that the market “discounts” SoFi, with the company ready to deliver a “significant ramp” in profit before interest, tax, depreciation and amortization in the second half. from 2022 and into 2023.

Barker expects significant earnings momentum in 2023 and 2024 driven by rapid growth in deposits, the expiry of the student loan moratorium and revenue growth in the financial services segment.

Overall, Street is cautiously optimistic about SoFi, with a “moderate buy” consensus rating based on seven “buy” and four “hold.” The average SoFi price target of $ 10.23 implies 72.66% upside potential from the current level.

Conclusion

The shares in PayPal, Block and SoFi have fallen by 61.75%, 51% and 54.6% respectively this year. These fintech stocks may continue to be under pressure in the short term due to macro headwinds.

Wall Street analysts are currently cautious about SoFi, while being more optimistic about PayPal and Block. Based on higher upside potential from current levels, Block currently appears to be the best choice.

At the date of publication, Sirisha Bhogaraju (neither directly nor indirectly) held any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication Guidelines.

Sirisha Bhogaraju has over 15 years of experience in financial research. She has written in-depth research reports and covered companies across different sectors, with the main focus on the consumer sector. Sirisha has a master’s degree in finance.