Stocks to buy

There’s a lot of money in money. The fintech industry is projected to maintain a compounded annual growth rate of 16.5% from now until 2032. That growth rate should be music to fintech investors’ ears, but not every stock has delivered good results.

Many established banks have unappealing long-term results. For instance, Citigroup (NYSE:C) is down over the past five years despite a good year-to-date rally. Wells Fargo (NYSE:WFC) was flat for multiple years before a 22% year-to-date gain.

While established banks offer lower P/E ratios, investors may want to look for fintech stocks with higher valuations that also promise better growth prospects. Depending on where you look, you may find fintech stocks with decent valuations and promising growth prospects. Wondering which fintech stocks look the most appealing as the summer starts to wrap up? These are some of the top fintech stocks to consider for long-term returns.

Nu Holdings (NU)

Source: Lais Monteiro / Shutterstock

Nu Holdings (NYSE:NU) is a Brazilian digital bank that recently surpassed 100 million customers. Shares are up by 53% year-to-date and trade at a 48 P/E ratio. It’s a higher valuation than most banks, but the financials make it easier to understand. 

While most banks have flat or slight revenue growth, Nu Holdings delivered 69% YOY revenue growth in the first quarter of 2024. Net income soared by 167% YOY in the same quarter, resulting in a net profit margin of 13.8%. Most of Nu Holdings’ customers are active, based on an 83% activity rate at the end of the quarter. The fintech firm offers bank accounts, credit cards, brokerage accounts, loans, and other financial products to keep customers engaged.

Wall Street analysts believe that the stock has more room to run. The average price target implies a 17% upside from current levels. The highest price target of $16 per share suggests a potential 29% gain.

Robinhood (HOOD)

Source: Fluna nightEtJ / Shutterstock.com

Robinhood (NASDAQ:HOOD) is another fintech stock that has enjoyed incredible success this year. Shares are up by 71% year-to-date as revenue and profits soar. Crypto traders played a role in the company’s 40% YOY revenue growth in the first quarter. Revenue from crypto transactions jumped by 232% YOY to reach $126 million. That was more than 20% of total revenue. Transaction revenue from equities and options trading had YOY gains of 44% and 16%, respectively. 

Robinhood has two other components for total revenue: interest revenue and other revenue. Those segments were up by 22% YOY and 35% YOY respectively. Most of the “Other Revenue” category consists of Robinhood Gold, an innovative financial product that may challenge other banks and brokerage firms to offer something similar in the future.

Profits are also on the upswing. Robinhood registered $157 million in net income compared to a net loss of $511 million in the same period last year. 

American Express (AXP)

Source: First Class Photography / Shutterstock.com

American Express (NYSE:AXP) makes money from transaction fees, annual fees, and other costs associated with having a credit or debit card. The business model has worked well for decades, and the stock trades at a reasonable valuation. The stock’s 18 P/E ratio looks attractive given the company’s financial performance in recent quarters.]

Q2 2024 revenue increased by 8% YOY to reach $16.3 billion. Net income grew at a faster pace — 39% YOY — to reach $3.02 billion. Revenue marks an all-time high for the company as people and businesses opened 3.3 million new cards. American Express also raised its full-year EPS guidance from $12.65 – $13.15 to $13.30 – $13.80.

Shares are up by 31% year-to-date and have soared by 94% over the past five years. American Express also offers a 1.14% yield and has regularly maintained a double-digit dividend growth rate for several years. Wall Street analysts have rated the stock as a Moderate Buy

SoFi (SOFI)

Source: Poetra.RH / Shutterstock.com

SoFi (NASDAQ:SOFI) is a digital bank that offers credit cards, brokerage accounts, bank accounts, loans, and other financial products. The company hasn’t offered pleasant returns since becoming a publicly traded corporation, but soaring revenue and net income growth suggest that the tide is changing.

Revenue jumped by 37% YOY in the first quarter. Profits came to $88.0 million compared to a $34.4 million net loss in the same period last year. SoFi also wrapped up the quarter with 8.1 million active members. That’s a 44% YOY improvement for the fintech firm.

Wall Street analysts have rated the stock as a Hold with varying price points. The average price target suggests that SoFi is due for a 10% gain from current levels. The highest price target of $12 per share suggests a more optimistic 62% gain from current levels. SoFi can achieve the latter price target if revenue and profit margins continue to soar.

Morningstar (MORN)

Morningstar (NASDAQ:MORN) is an investment research firm that helps investors make data-backed decisions with their portfolios. The company offers an array of products that cover data analytics, market insights, simulations, and other areas. Shares are up by 18% year-to-date and have more than doubled over the past five years. 

The stock has a 57 P/E ratio and a 0.50% yield. Morningstar recently hiked its dividend by 8% YOY, going from a quarterly payout of $0.375 to $0.40 per share. Morningstar has a good history with maintaining a solid dividend growth rate over several years.

Morningstar’s second quarter results suggest that the rally can continue. Revenue increased by 13.3% YOY to reach $571.9 million. Meanwhile, diluted net income per share soared by 90.5% YOY to reach $1.60. Profits came in at $69.1 million, resulting in a 12.1% net profit margin. Morningstar’s revenue is also up by 13.2% YOY over the past six months.

Moody’s (MCO)

Source: Daniel J. Macy / Shutterstock.com

Moody’s (NYSE:MCO) is a risk management firm that has delivered similar gains as Morningstar. Shares are up by 18% year-to-date and have gained 121% over the past five years. Moody’s trades at a 44 P/E ratio and offers a 0.76% yield. Moody’s has been growing its dividend payouts for 15 years while maintaining an 11.82% annualized dividend growth rate over the past decade.

The fintech firm reported good second quarter results. Revenue increased by 22% YOY to reach $1.8 billion while adjusted diluted EPS increased by 43% YOY to reach $3.28. Moody’s maintained the same revenue growth rate YOY over the past six months, while EPS is up by 26% YOY compared to the previous six months. Profits are accelerating and outpacing revenue growth, translating into higher profit margins.

Moody’s Investors Service Revenue was a key growth driver. This segment was up by 36% YOY compared to a 7% YOY increase in Moody’s Analytics revenue.

Visa (V)

Source: Kikinunchi / Shutterstock.com

Visa (NYSE:V) is another credit and debit card issuer that is worthy of a closer look. The stock hasn’t faired well this year and is flat so far. However, it has an 0.80% yield and regularly maintains a double-digit dividend growth rate. 

The credit and debit card issuer’s financials have been good, despite the flat year-to-date performance. Visa reported 10% YOY revenue growth in the third quarter of fiscal 2024. Net income jumped by 17% YOY to reach $4.9 million. Visa closed out the quarter with a sterling 54.7% net profit margin. The firm regularly achieves net profit margins above 50%. Cross-border volume increased by 14% YOY in the third quarter, contributing to the solid earnings report.

Visa has many fans in Wall Street. The stock is rated as a Strong Buy with an average price target that projects a 22% gain from current levels. The highest price target of $345 implies that the stock can gain an additional 33%.

On this date of publication, Marc Guberti held a long position in SOFI. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing 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.

Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.

Articles You May Like

Gary Gensler reviews his accomplishments, says he was ‘proud to serve’ as SEC chair
Trump is the most pro-stock market president in history, Wharton’s Jeremy Siegel says
David Einhorn to speak as the priciest market in decades gets even pricier postelection
Hedge funds performed better under Democratic presidents than Republican ones, history shows
Three Mile Island restart could mark a turning point for nuclear energy as Big Tech influence on power industry grows