Many fintech stocks are trying to lift themselves from the rubble after falling off their peaks in 2021. Not all the financial technology innovators have garnered meaningful momentum, with some continuing to face an existential crisis amid big tech’s move to capture a more significant slice of the digital payments market. These are becoming major hot stocks.
These days, it seems like the traditional tech companies are gaining more of an edge over the fintech pure-plays. As an investor looking to capitalize on the rise of digital payments and other fintech innovations, which includes everything from digital wallets to savings investing and even cryptocurrency investing, it’s worth broadening one’s perspective to encompass stocks that wouldn’t be necessarily viewed as a fintech play first and foremost.
As with most technological trends, there will be winners (share gainers) and losers. Let’s check in with three different ways to play fintech that could be winning bets.
SoFi Technologies (SOFI)
SoFi Technologies (NASDAQ:SOFI) is a wildly popular finance app that’s been incredibly popular among young people, like millennials, some of whom are not big fans of the big banks. At its lowest point, SOFI stock shed more than 80% before bottoming out and marching higher in 2023, thanks partly to hopes for lower interest rates.
Undoubtedly, the $7.47 billion company was ultra-sensitive to interest rates, given it only recently clocked in its first quarterly profit. With lower rates on the way, newfound momentum (it’s still down about 69% from its highs, though) following a solid Q4 earnings beat, and profitability in sight, it’s hard not to want to give the innovative neobank play the benefit of the doubt.
Since its late-2022 lows, SOFI stock is up around 77%. It’s been a turbulent ride since then, but many investors hope the company can explode higher over the coming years as growth meets better margins.
Block (NYSE:SQ) is another fintech play that’s been riding higher lately, now up 70% from its October 2023 lows. Like SoFi, Block is a high-growth play that could really use a handful of rate cuts as it attempts to balance growth with margin enhancement. As certain analysts turn their back on SOFI stock, many others are hiking their ratings on Block stock.
Recently, BTIG hiked SQ stock to Buy from Neutral, thanks in part to strength and growth prospects across its Square and Cash App platforms. Though Square, Square’s Point-of-Sales payments platform, has also been picking up traction of late, it’s tough to look past the robustness of Cash App as Block offers a growing range of services that go above and beyond just sending money to a friend for a lunch.
Cash App is a great place to bank, buy stocks and crypto, and even file one’s taxes. Undoubtedly, Cash App looks increasingly like a super app for those seeking to meet all their financial service needs in one place. That alone warrants a heftier multiple, in my opinion. At just shy of two times price-to-sales, SQ stock is definitely one of the most intriguing as it looks to add to its recent gains. This certainly earned a spot on our list of hot stocks.
American Express (AXP)
American Express (NYSE:AXP) is an old-time financial services company with a rich history that saw it shift from express delivery services (hence the firm’s name) to travelers’ cheques and, eventually, to credit and charge cards. With new fintech-flavored financial services offered by a broader range of firms, it appears that American Express (or AMEX) is evolving again to become more of a fintech firm.
Today, the stock’s at a fresh all-time high of around $210 per share. The latest surge (of around 7% in a session) was largely thanks to upbeat management guidance following what was otherwise an in-line quarter. As a part of the new guidance, AMEX expects revenue to come in at 9-11%. CEO Squeri also noted his “aspiration of revenue growth of 10% plus” for the near future.
With a solid growth profile enriched by younger new cardholders drawn in by Millennial-tailored perks and other services (think convenient installment-based payments), I find the 18.65 times trailing price-to-earnings multiple to be way too low for a firm that’s continuing to evolve for the modern era. Up ahead, I’d look for data analytics and more tech-driven financial services to draw in even more cardholders, especially from the Zoomer and Millennial generations. This and the other hot stocks we mentioned would be great additions to your portfolio.
On the date of publication, Joey Frenette owned shares of American Express. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.