It can be a challenge finding the best fintech stocks to buy. After all, they did not do very well in 2022. These stocks underperformed compared to the S&P 500 after a healthy couple of years.
Because of continuing macroeconomic headwinds, they are not doing well. However, investing in finance is full of daily adventures, making it unwise to overlook undervalued fintech stocks to buy. These picks have the potential to disrupt the market massively.
The fintech industry presents an interesting investment opportunity, as the pandemic has sped up the trend toward digital payments.
The rise in work-from-home arrangements, lockdowns, and e-commerce has increased demand for digital payment solutions, providing significant benefits to many fintech firms.
As a result, fintech stocks are gaining popularity. They offer the opportunity for windfall profits and significant growth over time. This trend has highlighted the success of this sector, making it a desirable choice for investors.
While pandemic-induced tailwinds are fading and macro challenges, geopolitical concerns, and a potential economic slowdown may affect fintech stocks in the short term, the long-term outlook for the financial technology space remains promising.
The continued rise in e-commerce, the growing adoption of contactless and mobile payments, and the convenience and speed of transacting contribute to attractive long-term prospects for the fintech industry.
Hence, do not let the recent banking crisis deter you from investing in fintech.
Considering the long-term prospects, we have compiled a list of three fintech stocks to buy.
| PYPL | PayPal Holdings | $73.24 |
| MELI | MercadoLibre | $1214.96 |
| BAC | Bank of America | $28.75 |
PayPal (PYPL)
PayPal Holdings (NASDAQ:PYPL) has established itself as the leading online payment industry player, supported by a remarkable portfolio of businesses.
Its Venmo platform for person-to-person payments has positioned itself as the industry’s top performer and continues to experience impressive user base growth.
PayPal has also made strategic acquisitions of complementary businesses, including Honey’s e-commerce tool, which serves it well.
In 2022, PayPal encountered challenges within its trading market as several unprofitable and emerging fintech stocks faced a significant decline.
Despite not fitting this description, the company’s earnings decline and growth concerns resulted in it being treated similarly to newer unprofitable fintech startups, causing a substantial decrease in its stock value from its previous highs.
PayPal experienced a slow growth rate of 8% in revenue, marking its weakest performance in years. The company’s non-GAAP (adjusted) earnings-per-share saw a decline of 10.2% year over year, resulting in a figure of $4.13.
This underperformance can be attributed to the long-anticipated full split with eBay (NASDAQ:EBAY), which stopped using PayPal to pay sellers the previous summer. However, excluding eBay, PayPal’s revenue grew by a more impressive 12%.
Adding to these struggles are the company’s weak vital operating metrics, with user growth amounting to a mere 2% in 2022 and total payment volume (TPV) increasing by only 9%.
Although not catastrophic, these numbers represent a decline from past performance, and Wall Street has responded accordingly. For the past five years, PayPal’s TPV growth has averaged 24%, or 28% if excluding eBay. Between 2019 and 2021, active accounts rose from 305 million to 426 million.
Hence, the recent stock price decline appears excessive. PayPal’s current valuation suggests it represents a compelling value opportunity.
MercadoLibre (MELI)
MercadoLibre (NASDAQ:MELI) is a leading online marketplace for Latin America.
This platform offers various products and services, ranging from apparel to electronics. Because of its business model, investors often refer to MercadoLibre as the Amazon (NASDAQ:AMZN) of Latin America.
Execution is the primary reason to invest in the company. The company exceeded the consensus revenue and earnings estimates in the fourth quarter. The numbers were surprising as we are in a difficult operating environment.
In contrast to many struggling e-commerce players, MercadoLibre achieved robust year-over-year growth in gross merchandise volume across its three major markets in Q4, with growth rates of 83% in Argentina, 22% in Brazil, and 28% in Mexico.
This impressive performance is because of the company’s well-established logistics network, which boasts a remarkable 94% penetration rate in the Latin American market, providing a significant competitive advantage. Despite the high network and fulfillment center penetration level, the company maintained control over shipping costs.
MercadoLibre has leveraged the power of its e-commerce business to establish a formidable fintech ecosystem. Initially introduced in 2003 to facilitate e-commerce transactions, Mercado Pago has become a complete financial services firm. And its focus on the Latin American market gives it a competitive edge over its peers.
In addition, Mercado Credito, the company’s credit arm, enables loans to vendors and customers, raising enthusiasm for the online marketplace from all parties involved. This interlinked effect is why Mercado Libros flourishes.
Despite its business model’s considerable size and robustness, the stock is currently trading at a tempting valuation of just 5.6 times price-to-sales. That makes it one of the more attractively valued fintech stocks to buy.
Bank of America (BAC)
If you are looking for solace as several banks implode, then Bank of America (NYSE:BAC) is one of the safer fintech stocks to buy. The last few weeks highlight that the banking sector is far from dull.
Bank of America’s recent accolades have shown its commitment to technology. It includes being named the top bank for “Online Banking and Mobile Banking Functionality” by Javelin and receiving the “Best Consumer Digital Bank in the U.S.” award from Global Finance in 2022.
These honors underscore the critical role that technology has played in the bank’s growth and development.
Like other banks, Bank of America benefited from the Federal Reserve’s hawkish interest rate hikes in 2022.
While inflation has decreased, it has not yet reached the 2% target set by the Fed. That suggests additional rate hikes will likely occur in 2023 and beyond, albeit less aggressively. This development will boost Bank of America in the coming quarters.
Investors seeking long-term growth and income potential will consider BAC at this critical juncture. A robust balance sheet, favorable positioning within the current economic situation, and an attractive dividend yield of 3.06% represent an attractive investment option for those searching for fintech stocks to buy.
Let the current crisis be an opportunity. Shelby M.C. Davis, a legendary money manager, sums it up well. “Invest for the long haul. Don’t get too greedy, and don’t get too scared.”
On the publication date, Faizan Farooque did not hold (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.