The easiest way to find the best fintech stocks to invest in is to examine the holdings of a fintech ETF such as the Global X Fintech ETF (NASDAQ:FINX). I would go so far as to say that most retail investors interested in gaining exposure to fintech stocks should consider buying shares of FINX and calling it a day. The fund offers exposure to 66 fintech stocks, thereby avoiding too much company-specific risk.
However, for those who want to bet on individual fintech stocks, FINX’s top holdings are a good place to start. So, for today’s list of the best fintech stocks to buy, I’ve selected three from the fund’s top 20 holdings.
Be aware that all three of my choices have gotten hammered in 2022, with each losing more than a quarter of its value so far this year. But that could make them excellent buys if you’re willing to hold for the long term.
Block (SQ)
Block (NYSE:SQ) is down 65% year to date and 78% over the past 52 weeks. Those are some big-time losses. However, CEO Jack Dorsey will get the last laugh because Block is building an ecosystem of ecosystems that is second to none.
I’ve previously discussed how the company used its $29 billion acquisition of “buy now, pay later” service provider Afterpay to further connect its Cash App users with its Square sellers. In early October, Afterpay announced a new payment solution that allows consumers to finance a purchase between $400 and $4,000 over a six- or 12-month period. There are no late fees, a cap on total interest owed, and a “clear view of what is owed at time of purchase which won’t increase during the course of the payment plan.”
Currently only available to online merchants, the monthly payment solution will be available for in-person purchases in 2023.
I’m sure there are financial planning experts who have a problem with this type of offering. Still, when used responsibly, I think it’s an excellent way for younger consumers to properly budget their big-ticket items like a bed.
Square is currently trading at 1.65x sales. That’s its lowest price-to-sales multiple since it went public.
Toast (TOST)
I went out on a limb in October 2021 by giving 10 reasons to buy Toast (NYSE:TOST), which provides integrated restaurant technology platforms. The stock had recently gone public at $40 a share. Today, shares trade 53% below their IPO price and are down 46% year to date. Boy, do I look silly. But I still stand by many of my 10 points.
Years ago, I had a friend in the publishing business that sold a reservation diary to restaurants. This was before computers made print diaries redundant. He did very well because he designed the diary to meet the needs of restaurateurs. Toast has come along and is working with restaurants to help them operate efficient businesses — online and off.
One of my 10 points was the opportunity for international growth. Toast generated zero revenue outside of the U.S. when it went public. It still doesn’t have any. Once it starts making money, you can be sure it will expand beyond the U.S.
Mizuho analyst Dan Dolev recently stated that he thought Toast could reach profitability in 2023, a year ahead of schedule. As a result, Dolev upgraded TOST to “buy” from “neutral.” He also raised his 12-month target price to $24, which is 28.5% higher than where it’s currently trading.
“Our proprietary Mizuho survey of 55 Toast restaurants uncovers the positive impact on sales and profits from cross-selling payroll and adjacent SaaS [software as a service] products,” Barron’s reported Dolev wrote in a note to clients.
Long term, Toast could be one of the best fintech stocks to buy.
Wise (WPLCF)
Wise (OTCMKTS:WPLCF), a UK-based provider of cross-border money transfer services that went public in July 2021, is down 25% year to date.
As someone who lives in Canada and writes for U.S. media outfits, I have some first-hand experience with this fintech. Wise’s business account enables me to get paid in U.S. dollars. I can then convert that USD to Canadian dollars and transfer them to my Canadian bank account at a much more reasonable rate than any Canadian bank. In my experience, Wise is one of the few fintechs that deliver the goods, which is why it continues to grow at such a torrid pace.
In its most recently reported quarter, Wise saw volume increase 49% year over year, while revenue was up 51%. For its full fiscal year, the company expects to grow revenue between 30% and 35%. It also expects to increase revenue in the medium term at a compound annual growth rate of more than 20% a year with EBITDA margins of 20% or more.
Wise ended the quarter with 5 million customers, up nearly 79% from a year ago. Approximately 94% of its customers are personal accounts. I expect Wise’s business customer base will continue to grow over time. The volume put through business accounts is significantly greater. I could see a day when business accounts generated more revenue than personal accounts. We’re not there yet, though.
— Will Ashworth
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Source: Investor Place