Investors’ fears over the Federal Reserve’s aggressive monetary policy tightening to tame the surging inflation, the possibility of a recession, rising energy and commodity prices, and the continued supply disruptions have kept the stock market under pressure. The market sell-off did not spare fintech stocks, and many have retreated significantly.
The fintech industry has become extremely popular as it has helped improve payments processing, insurance, lending, wealth management, etc. Fintech companies have facilitated access to easy credit, money management, and simplicity in making payments. However, mounting data security concerns are plaguing the industry. With rising cyberattacks, consumers are wary of using fintech solutions. According to FS-ISAC’s Navigating Cyber 2022 report, third-party risk, zero-day vulnerabilities, and ransomware groups are likely to adapt to the changing cyber environment and continue to increase in 2022.
In addition to concerns surrounding cyberattacks, the rising competition in the fintech space could keep fundamentally weak stocks under pressure. We think it could be wise to avoid fundamentally weak fintech stocks Bill.com Holdings, Inc. (BILL), Block, Inc. (SQ), and Futu Holdings Limited (FUTU).
Bill.com Holdings, Inc. (BILL)
BILL is a leading provider of cloud-based software that simplifies, digitizes, and automates back-office financial processes for small and mid-sized businesses. It provides an AI-enabled financial software platform that creates seamless connections among users, suppliers, and clients.
BILL’s non-GAAP loss from operations widened 166.5% year-over-year to $5.67 million for the third quarter ended March 31, 2022. The company’s non-GAAP net loss widened 398.3% year-over-year to $8.68 million. Also, its non-GAAP loss per share widened 300% year-over-year to $0.08.
Analysts expect BILL’s EPS for fiscal 2022 and 2023 to remain negative. Over the past nine months, the stock has lost 56.3% to close the last trading session at $128.04.
BILL’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an F grade for Value and Stability and a D for Quality. It is ranked #140 out of 155 stocks in the F-rated Software – Application industry. Click here to see the other ratings of BILL for Growth, Momentum, and Sentiment.
Block, Inc. (SQ)
SQ is a technology company that creates tools that enable sellers to accept card payments and provide reporting, analytics, and next-day settlement. The company focuses on financial services. Also, its building block comprises Square, Cash App, Spiral, TIDAL, and TBD54566975.
For the fiscal first quarter ended March 31, 2022, SQ’s total net revenue decreased 21.6% year-over-year to $3.96 billion. The company’s net loss attributable to common stockholders came in at $204.19 million, compared to a net income of $39 million in the year-ago period. Also, its loss per share came in at $0.38, compared to an EPS of $0.08 in the year-ago period.
For the quarter ending June 30, 2022, SQ’s EPS is expected to decline 72.7% year-over-year to $0.18. Over the past nine months, the stock has lost 69.5% to close the last trading session at $76.58.
SQ’s POWR Ratings are consistent with this bleak outlook. It has an overall F rating, which translates to a Strong Sell in our proprietary rating system.
It has an F grade for Stability and Sentiment and a D for Growth. Within the D-rated Financial Services (Enterprise) industry, it is ranked #101 out of 107 stocks. To see the other ratings of SQ for Value, Momentum, and Quality, click here.
Futu Holdings Limited (FUTU)
Headquartered in Hong Kong, FUTU is an investment holding company offering digitized brokerage platforms. The company provides investment services through its digital brokerage platform, Futu NiuNiu. Its service offerings include trade executions and margin financings, which allow its clients to trade securities across markets such as stocks, warrants, options, and exchange-traded funds (ETFs).
FUTU’s total revenues decreased 25.6% year-over-year to HK$1.64 billion ($208.95 million) for the first quarter ended March 31, 2022. The company’s gross profit declined 19.8% year-over-year to HK$1.41 billion ($179.65 million). Also, its non-GAAP adjusted income decreased 47.2% year-over-year to HK$622.22 million ($79.27 million).
Analysts expect FUTU’s EPS and revenue for fiscal 2022 to decrease 7.2% and 5.8% year-over-year to $2.26 and $856 million, respectively. Over the past year, the stock has lost 69% to close the last trading session at $45.15.
FUTU’s weak prospects are reflected in its POWR Ratings. It has an overall D rating, equating to a Sell in our rating system.
It has an F grade for Stability and a D for Growth and Value. It is ranked last out of 12 stocks in the F-rated Financial Marketplaces industry. Click here to see the other ratings of FUTU for Momentum, Sentiment, and Quality.
BILL shares closed at $117.85 on Friday, down $-10.19 (-7.96%). Year-to-date, BILL has declined -52.70%, versus a -17.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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