Financial technology stocks have been the unsung heroes of Wall Street for what feels like an eternity. While industries like AI, cloud computing, and renewable energy bask in the limelight, fintech stocks have been left out in the cold. However, their time in the sun is fast approaching.
Many top fintech companies have been quietly fortifying their core businesses, sustaining robust growth trajectories, enhancing profitability, and reinforcing their financial positions. In essence, they’ve been laying down solid fundamental groundwork.
Although overshadowed, Wall Street has been overly fixated on the next big thing, while the financial sector itself has been out of favor, with investors gravitating towards more thrilling market sectors. But I firmly believe this is all about to change.
With the Federal Reserve hinting at interest rate cuts to bolster the slowing economy, a resurgence of interest and activity in financial stocks is imminent. And when that wave of excitement sweeps through, certain fintech stocks are set to shine brightly.
PayPal’s Potential
PayPal (NASDAQ:PYPL) has lingered in the shadows for too long. With its stock price stagnant below $100 for over two years, PYPL now trades at a modest $65 per share. This undervaluation severely underestimates the potential of this fintech giant, a key player in the digital payments realm with near-universal vendor acceptance.
Trading at a mere 17-times earnings, critics may highlight PayPal’s recent user account growth stagnation. However, with the prospect of eased interest rates and a rebound in online transactions, I anticipate a positive shift in this metric. Even if not, PayPal has continuously delivered robust top-line growth from its existing user base alongside stellar profits.
Of particular interest is PayPal’s bold share buyback initiative. The executive team intends to repurchase a remarkable $5 billion in stock this year, on top of a previous $5 billion. With such fervent dedication to enhancing shareholder value, PYPL stock emerges as a compelling risk-reward proposition in the fintech arena.
Block’s Trajectory
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Block (NYSE:SQ) has also borne the brunt of the prolonged fintech slump. Like its counterpart PayPal, Block has struggled to gain significant sustained upward momentum despite its substantial growth credentials.
What distinguishes Block is its reputation as one of the fastest-growing fintech entities. However, this accolade is accompanied by relatively narrower profit margins in comparison to more established players. While the company has made notable strides in profitability by significantly improving margins, the stock has remained range-bound.
When the broader fintech sentiment shifts, I anticipate SQ stock will experience a meteoric rise. A case in point: From $17.5 billion in revenue and $540 million in losses in 2022 to the current day, changes are afoot. Block is poised to embark on a journey of prosperity and growth. Hold on tight; the ride is about to get exhilarating.
