With interest rate cuts looming, it’s an ideal time to load up on fintech stocks to watch.
Investors were served another promising inflation update, bolstering hopes for September rate cuts. Core CPI, which strips away food and energy prices, increased just 0.2% sequentially and aligned with estimates. Additionally, the U.S. economy expanded by an encouraging 2.8%, surpassing expectations by 0.8%, reinforcing the soft landing scenario.
Consequently, investors see the odds of a potential rate cut jump to 100% following recent positive economic data. Naturally, we’re likely to see greater consumer spending and confidence, which sets the stage for robust adoption of fintech solutions. Hence, it’s the right time for savvy investors to pick up fintech stocks before they surge in value.
That said, here are three standout fintech stocks to watch with strong fundamentals and significant upside potential, potentially leveraging sector tailwinds this month.
Fintech Stocks to Watch: Visa (V)
Visa (NYSE:V) is a juggernaut in the realm of payment technology, facilitating seamless electronic funds transfers globally. Additionally, it offers payment processing and information services, linking multiple stakeholders across more than 200 countries. Through its low-cost, high-volume electronic payment processing model, the company generates a gusher of free cash flows each year.
Given an A-graded evergreen profitability profile, Visa has grown its dividend payouts for the past 15 consecutive years. The consistent growth in dividends is complemented by its rich share buyback history, which rose sharply in its most recent quarter. Its quarterly buyback volume jumped to $4.53 billion in the second quarter (Q2), a 64% increase sequentially.
The firm recently dished another earnings beat in Q2, while revenue growth slowed during a slowdown in cross-border volumes. Nevertheless, its core business remains in excellent shape and could get a major shot in the arm following rate cuts.
Nu Holdings (NU)
Nu Holdings (NYSE:NU) is a hyper-growth fintech business in the fast-evolving Latin American region. Its customer base recently eclipsed the impressive 100 million mark, penetrating markets beyond Brazil, including Mexico and Colombia. Through its diversified offerings, Nu has struck a chord with unbanked and tech-savvy customers in the region.
Since its public debut three years ago, Nu stock has exhibited superb momentum in the stock market. NU stock is up 56% in the past year and more than 31% in the past six months. Despite the stellar run-up in value, Wall Street expects a 10% average upside from current prices.
Much of the excitement around the company relates to its robust profitability engine. Nu now ranks as the largest digital bank outside of Asia, with expansions into major Latin American markets like Mexico and Colombia adding to its growth trajectory. To put things in perspective, it reversed a net loss of $165 million in 2021 to post a massive $1.27 billion in net income on a trailing 12-month (TTM) basis.
SoFi Technologies (SOFI)
SoFi Technologies (NASDAQ:SOFI) has navigated a testing phase marked by heightened interest rates. Consequently, its stock has nosedived upwards of 24% year-to-date (YTD), dampening investor enthusiasm. However, with rate cuts coming up, SOFI stock presents itself as a superb value play.
Perhaps the firm’s biggest accomplishment was achieving GAAP profitability in the fourth quarter (Q4) last year. It kept up the momentum in Q1, posting $88 million in earnings. Additionally, adjusted sales surged 26.2% during the quarter, beating estimates by $21.1 million. Moreover, new member additions reached 8.1 million by the end of Q1, up 44% from the prior-year period.
Given the firm’s aggressive strategy, it expects to continue generating more than 20% annual revenue growth over the next few years, supported by key acquisitions such as Technisys and Galileo, setting the stage for an expansive future. Though investing in it has risks, SOFI stock is a superb buy at current levels.
On the date of publication, Muslim Farooque did not have (either 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.