The Global X FinTech ETF (NASDAQ:FINX) is up by more than 20% year over year (YOY) for good reason. Although financial technology stocks are procyclical, the industry possesses embedded secular growth. As such, fintech stocks are likely to outperform the market in most years.
According to Fortune Business Insights, the fintech arena may proliferate at a compound annual growth rate of 17% until 2030. Sure, data vendor predictions aren’t uniform. But the general consensus is that fintech will outpace GDP growth for the rest of the decade. Moreover, various fintech companies possess idiosyncratic catalysts given their intense research and development spending paired with best-in-class human capital.
With that in mind, let’s examine three fintech stocks to consider this year.
Global Payments (GPN)
Citigroup (NYSE:C) recently added GPN (NYSE:GPN) stock to its watchlist. It anticipates the stock to rake in 17% in gains this year and outperform its peers. Global Payments has numerous catalysts in play.
Moreover, the stock’s put-call ratio of 1.06x implies bearish ex-post activity from options traders, which could revert to mean in 2024, concurrently providing GPN stock with technical support.
Global Payments released its Q3 results in October, beating its earnings-per-share target by four cents amid supportive growth across the board and lower-than-anticipated input costs. Moreover, GPN raised its full-year earnings guidance, stating that it expects its EPS to settle between $10.39 and $10.45, well above the average analyst estimate of $10.40. This updated guidance may entice investor interest, leading to significant short-term upside.
Furthermore, Global Payments is on course to acquire EVO Payments, which has an enterprise value of $4 billion. Granted, the deal is expected to occur at a premium. However, EVO payments is due to deliver $125 million in synergies, conveying that it will be accretive. The EVO Payments deal communicates a potential growth-by-acquisition roadmap for Global Payments. In fact, the firm has a cash position of $2.30 billion, hinting that a succession of high-profile acquisitions is likely, which could fuel long-term growth.
Lastly, GPN stock looks good from a capital markets perspective. The stock’s price-to-earnings-growth ratio of 0.96x indicates that its EPS growth is underestimated by the market. Additionally, GPN stock’s price-to-cash flow ratio of 14.86x is at a near 30% discount to its five-year average, hinting that relative value is in store.
PayPal (PYPL)
PYPL (NASDAQ:PYPL) is a buy-the-dip opportunity. PYPL stock’s approximate 20% YOY slump has opened up a value gap, given the company’s sustained fundamental zeal and well-placed valuation multiples.
Goldman Sachs (NYSE:GS) listed PayPal as one of its top S&P 500 growth stock picks last month. According to Goldman, PYPL stock’s growth is within the 83th industry percentile providing it with a relative advantage. Although an isolated observation, PayPal’s five-year compound AGR of 14.24% adds substance to Goldman’s statement.
Moreover, PayPal’s future growth seems intact. The company’s total payment volume has achieved near double-digit growth in PayPal’s last seven quarters. Also, it’s set to sustain due to the growing popularity of cross-border commerce. Further, PayPal’s stablecoin endeavor, paired with a planned digital wallet and checkout development, could spur growth due to wider end-market targeting and enhanced customer experience.
Adding to PayPal’s robust fundamentals are high-quality valuation multiples. For instance, PYPL’s price-to-earnings-growth ratio of 0.26x is best-in-class. And, its price-to-sales ratio of 2.34x is nearly 70% below its five-year average.
Coinbase (COIN)
It’s high beta season, meaning risky assets such as Bitcoin (BTC-USD) and other cryptocurrencies have surged. Moreover, U.S. interest rates are set to pivot, providing additional latitude to high-risk assets in 2024. In addition, lower interest rates could relay into the U.S. Dollar, thereby compressing it. In turn, that will provide support to U.S. dollar proxies such as cryptocurrencies.
My quest to find undervalued fintech stocks led me toward Coinbase (NASDAQ:COIN). COIN has surged by nearly 3x in the past year, owing to systematic risk and various structural inflection points. The latter was conveyed by Coinbase’s third-quarter earnings beat, wherein its revenue surged by 14% YOY growth to reach $674.15 million. Additionally, COIN achieved a quarterly EPS beat worth 52 cents, showing that its bottom line performed better than anticipated. Although the company remains unprofitable, initiated cost-cutting in administratiON and marketing, paired with higher top-line prospects, indicates that profitability is around the corner.
COIN’s price-to-sales ratio of 13.45x and forward price-to-cash flow multiple of 37.41x indicate that COIN is far from value stock. However, Coinbase’s resilient growth and promising end market pardon its elevated price multiples.
On the date of publication, Steve Booyens held an indirect long position in PYPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
