While most industries suffered significant losses last year amid the COVID-19 pandemic, the fintech space gained significantly with a surge in digital financial transactions. Investors’ interest in the fintech space is evident in Global X FinTech ETF’s (FINX) 30.1% gains over the past year.
And thanks to the spread of the hyper-contagious COVID-19 Delta variant, the resurgence of COVID-19 cases in several countries could spur an increase in demand for fintech solutions for the foreseeable future. In addition, the increasing adoption of artificial intelligence (AI)-based technology, online wallet, and even cryptocurrency transactions have been driving a shift toward a cashless society. According to The ExpressWire report, the fintech market is expected to grow at an 8.6% CAGR between 2021 - 2024.
Given this backdrop, we think it could be wise to bet on fundamentally strong fintech stocks Futu Holdings Limited (FUTU), SoFi Technologies, Inc. (SOFI), and Paysafe Limited (PSFE). Wall Street analysts believe these stocks have plenty of upside to deliver.
Futu Holdings Limited (FUTU)
Headquartered in Hong Kong, FUTU is an international online brokerage and wealth management platform. The company provides trading, clearing, settlement services, margin financing and securities lending services, and a stock yield enhancement program. It also offers online wealth management services under its Futu Money Plus brand.
In May, Futu Clearing Inc. received a $400 million strategic capital injection from its parent company, FUTU. Ila Jehl, Futu Clearing’s CEO, said, “As Futu Holdings grows, so has the number of transactions handled by Futu Clearing, making it essential that we expand our capacity accordingly. The $400 million of capital infusion is a strong indication of Futu Holdings' confidence in the U.S. markets and reflects a commitment to meeting the needs of global investors.”
FUTU’s net sales increased 349.4% year-over-year to $283.56 million for its fiscal first quarter ended March 31, 2021. Its gross profit grew 372.6% year-over-year to $226.56 million. Its adjusted net income increased 634.1% year-over-year to $151.67 million. And its EPS came in at $0.13, up 566.7% year-over-year.
Analysts expect FUTU’s EPS and revenue to increase 147% and 151%, respectively, year-over-year to $3.31 and $1.07 billion in its fiscal year 2021. It surpassed the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 379.1% over the past year to close yesterday’s trading session at $137.95. Wall Street analysts expect the stock to hit $198.08 in the near term, which indicates a potential 43.6% upside.
SoFi Technologies, Inc. (SOFI)
SOFI is a digital financial services company that operates through three segments: Lending, Financial Services, and Technology Platform. The San Francisco company offers student loans, personal loans for debt consolidation and home improvement projects, and home loans.
On June 7, SOFI launched a new loan program to help ease borrower distress. Anthony Noto, SOFI’s CEO, said, “We’re always looking for new and creative ways to help people pursue their path toward financial independence. This is another example of how we’re supporting members in getting their money right.”
The company is scheduled to release its second-quarter financial results on August 12, 2021. SOFI’s non-GAAP revenue increased 150.7% year-over-year to $216.04 million for the first quarter, ended March 31, 2021. Its adjusted EBITDA came in at $4.13 million compared to a $66.15 million loss f in the prior-year quarter. Its membership numbers increased 110% year-over-year to 2.28 million.
For its fiscal year 2022, analysts expect SOFI’s revenue to increase 51.8% year-over-year to $1.49 billion. In addition, its EPS is expected to grow 63% in its fiscal year 2022. The stock has lost 34.6% over the past month to close yesterday’s trading session at $15.06. However, Wall Street analysts expect the stock to hit $27.50 in the near term, which indicates a potential 82.6% upside.
Paysafe Limited (PSFE)
Based in Hamilton, Bermuda, PSFE provides digital commerce solutions to online businesses, SMB merchants, and consumers through its Paysafe Network worldwide. In addition, it offers digital wallet solutions under the Skrill and NETELLER brands, which enable users to upload, store, withdraw, and pay funds and APMs from a virtual account.
This month PSFE formed a new partnership with Bankable to launch a broad range of integrated, omnichannel banking services from PSFE. Noah Sharp, the company’s CBO, said, “At Paysafe we’re progressing a number of innovative banking-as-a-service initiatives and broadening our network of relationships with leading banks, and we have a lot of exciting plans up our sleeve.”
PSFE’s revenue increased 5% year-over-year to $377.40 million for the first quarter ended March 31, 2021. Its eCash solutions’ adjusted EBITDA grew 110% year-over-year to $48.10 million, while its total liabilities decreased 22.7% year-over-year to $5.48 billion. Also, its free cash flow came in at $108.53 million, up 28.6% year-over-year.
The company’s EPS and revenue are expected to increase 10.10% and 216.70%, respectively, year-over-year to $0.19 and 1.70 billion in its fiscal year 2022. The stock has lost 7.1% over the past month to close yesterday’s trading session at $10.45. However, Wall Street analysts expect the stock to hit $16.33 in the near term, which indicates a potential 56.3% upside.
FUTU shares were trading at $144.68 per share on Wednesday morning, up $6.73 (+4.88%). Year-to-date, FUTU has gained 216.24%, versus a 16.70% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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