The fintech sector is thriving with technological advancements and the growing use of new financial solutions. Fintech companies are innovating rapidly, driven by AI and embedded finance trends. With the surge in mobile finance apps, consumers can handle various financial tasks on the go, setting fintech to replace many traditional banking processes.
Despite regulatory challenges and cybersecurity risks, strong innovation and security measures in fintech present attractive investment opportunities. Therefore, investing in leading consumer fintech stocks like PayPal Holdings, Inc. (PYPL), NerdWallet, Inc. (NRDS), and Qifu Technology, Inc. (QFIN) may be wise.
Consumer financial services have been revolutionized by digital access and fintech innovations like robo-advisors, BNPL, and BaaS. People increasingly trust neobanks and fintech companies for their customer experience, using Big Data and AI for personalized services. As a result, fintech is expected to grow significantly and disrupt over 28% of traditional banking services by 2027.
This year, the fintech market is set to exceed $340 billion and is projected to nearly quadruple to $1.15 trillion by 2032, with a CAGR of 16.5%. This growth is driven by strong spending, as fintech simplifies lending, savings, deposits, bill payments, and money transfers. Additionally, an estimated 87.4% of all U.S. transactions are expected to be cashless in 2024, further disrupting traditional banking.
Considering these conducive trends, let’s analyze the fundamental aspects of the three Consumer Financial Services picks, beginning with the third choice.
Stock #3: PayPal Holdings, Inc. (PYPL)
PYPL operates a technology platform that enables digital payments on behalf of merchants and consumers worldwide. It operates a two-sided network at scale that connects merchants and consumers, allowing its customers to connect, transact, and send and receive payments both online and in person.
On May 29, 2024, PYPL announced that its stablecoin, PayPal USD (PYUSD), is now available on the Solana blockchain, offering faster and cheaper transactions for users. Crypto.com, Phantom, and Paxos are among the first to provide onramps for using PYUSD on Solana.
In terms of the trailing-12-month levered FCF margin, PYPL’s 21.37% is 22.7% higher than the 17.42% industry average. Its 5.21% trailing-12-month Return on Total Assets is 388.9% higher than the 1.06% industry average. Additionally, its 21.40% trailing-12-month Return on Common Equity is 100.7% higher than the 10.69% industry average.
For the first quarter that ended March 31, 2024, PYPL’s net revenues increased 9.4% year-over-year to $7.70 billion. Its non-GAAP operating income grew 14.7% from the year-ago value to $1.40 billion.
The company’s non-GAAP net income and non-GAAP EPS were $1.16 billion and $1.08, up 20.4% and 27.1% year-over-year, respectively. In addition, the company’s free cash flow stood at $1.76 billion, an increase of 76.3% from the previous year’s quarter.
For the quarter ended June 30, 2024, PYPL’s revenue is expected to increase 7.2% year-over-year to $7.81 billion. Its EPS for fiscal 2025 is expected to increase 10.3% year-over-year to $4.58. It surpassed the Street revenue estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 8.3% to close the last trading session at $59.33.
PYPL’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Sentiment. It is ranked #18 out of 45 stocks in the Consumer Financial Services industry. To see PYPL’s Growth, Value, Momentum, Stability, and Quality ratings, click here.
Stock #2: NerdWallet, Inc. (NRDS)
NRDS operates a digital platform that provides consumer-driven advice about personal finance by connecting individuals and small to mid-sized businesses with financial product providers in the United States, the United Kingdom, Australia, and Canada.
In terms of the trailing 12-month gross profit margin, NRDS’ 90.81% is 51.9% higher than the industry average of 59.78%. Similarly, its 1.32x trailing-12-month asset turnover ratio is 510.4% higher than the industry average of 0.22x.
For the fiscal first quarter that ended March 31, 2024, NRDS reported revenues of $161.90 million. Its non-GAAP operating income rose 178.9% year-over-year to $10.60 million. Its adjusted EBITDA stood at $25.50 million, up 22% year-over-year. In addition, the company’s cash and cash equivalents of $110.90 million indicate an increase of 10% from the same period the previous year.
Street expects NRDS’ revenue for the quarter ended June 30, 2024, to increase 4.6% year-over-year to $149.85 million. Its EPS for fiscal 2025 is expected to grow by 111.5% year-over-year to $0.48. Over the past nine months, the stock has gained 106.2% to close the last trading session at $15.03.
It’s no surprise that NRDS has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Quality. Within the same industry, it is ranked #10. Beyond what we stated above, we also have given NRDS grades for Growth, Value, Momentum, Stability, and Sentiment. Get all the NRDS ratings here.
Stock #1: Qifu Technology, Inc. (QFIN)
Headquartered in Shanghai, the People's Republic of China, QFIN and its subsidiaries operate a credit-tech platform under the 360 Jietiao brand in the People's Republic of China. It provides credit-driven services and platform services.
In terms of the trailing-12-month EBITDA margin, QFIN’s 47.36% is 107.3% higher than the 22.84% industry average. Its 26.81% trailing-12-month net income margin is 15.8% higher than the 23.15% industry average. Additionally, its 0.38x trailing-12-month asset turnover ratio is 76.8% higher than the 0.22x industry average.
QFIN’s total net revenue for the first quarter which ended March 31, 2024, increased 15.4% year-over-year to RMB4.15 billion ($570.66 million). Its non-GAAP income from operations rose 33.7% over the prior-year quarter to RMB1.41 billion ($193.89 million).
For the same quarter, the company’s non-GAAP net income attributable to shareholders of QFIN and non-GAAP net income per ADS attributable to ordinary shareholders of QFIN came in at RMB1.21 ($166.39 million) and RMB7.58, respectively, up 23.3% and 28% year-over-year.
Analysts expect QFIN’s EPS for the fiscal 2024 to increase 10.5% year-over-year to $4.19. Its revenue for fiscal 2025 is expected to increase 5.2% year-over-year to $2.35 billion. QFIN’s stock has gained 35.1% over the past nine months to close the last trading session at $19.24.
QFIN’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It is ranked #3 in the Consumer Financial Services industry. It has a B grade for Value and Quality. To access QFIN’s grades for Growth, Momentum, Stability, and Sentiment, click here.
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PYPL shares were trading at $60.53 per share on Monday afternoon, up $1.20 (+2.02%). Year-to-date, PYPL has declined -1.43%, versus a 17.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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