Fintech stocks have had a miserable year. Just look at the year-to-date performance of the Global X FinTech ETF (NASDAQ:FINX). It’s down 50% compared with a 17% decline in the S&P 500. The silver lining here is that there are a number of cheap fintech stocks with excellent potential that investors can pick up at a discount prior to the next bull run in the sector.
When that bull will begin is anyone’s guess. But fintech stocks have seen renewed signs of life since PayPal (NASDAQ:PYPL) reported better-than-expected third-quarter results on Nov. 3, showing the sector is still vibrant and growing. Moreover, in recent weeks, investors’ appetite for risk seems to be reemerging, causing them to gravitate toward tech stocks and growth stocks.
Whether this trend persists remains to be seen. But there’s no denying that investors currently have a chance to buy the high-quality, cheap fintech stocks below on sale right now.
Paysafe (PSFE)
Paysafe (NYSE:PSFE), a payment-processing company, is trading at a bargain-basement valuation of 0.8 times trailing revenue. That’s despite the fact that analysts expect the company’s sales to remain unchanged this year and increase slightly next year. Estimates also call for Paysafe to generate a small profit in 2023.
On Nov. 10, the company delivered better-than-expected Q3 results, as well as a Q4 forecast that impressed the Street. Total payment volume rose 5% year over year in the third quarter to $32.5 billion.
I’ve been bullish on the stock for some time now. A little over a year ago, I noted that the company is well-positioned to capitalize on the rapidly increasing popularity of digital gambling. Two of the most popular online gambling companies, DraftKings (NASDAQ:DKNG) and Flutter Entertainment (OTCMKTS:PDYPY), use Paysafe to process customer payments.
Moreover, I find the company’s choice of Bruce Lowthers as CEO encouraging. Lowthers has held management positions in numerous fintech companies. Before taking the reins at Paysafe in May, he was president of Fidelity National Information Services (NYSE:FIS), which has a market capitalization of more than $36 billion. As president of FIS, Lowthers “was credited with accelerating the speed to market of innovative new products and services, heightening cross sell opportunities, and strengthening the overall client experience,” according to Paysafe.
Shares are down 61% on a year-to-date basis. However, they are up 11% over the past month and nearly 30% since the company announced earnings on Nov. 10.
PayPal (PYPL)
As I mentioned above, PayPal (NASDAQ:PYPL) reported stronger-than-expected third-quarter results on Nov. 3. Specifically, revenue rose 11% year over year to $6.85 billion, $30 million above analysts’ average estimate. Meanwhile, adjusted earnings per share came in at $1.08, down from the same period last year but better than the 96 cents analysts were expecting.
Shares initially sold off following the announcement, as the company’s Q4 revenue forecast disappointed the Street. Buy PYPL stock quickly rebounded and is now trading 11% higher than it was before reporting earnings.
Perhaps investors were cheered by the company adding nearly 3 million new active accounts in Q3 or the 15% year-over-year jump in total payment volume, excluding currency fluctuations.
Further, the company’s alliance with activist investor Elliott Management is bullish for PYPL stock long term. That’s because Elliott will likely push PayPal to cut costs and return more capital to investors.
After a 55% year-to-date decline, shares now trade with a forward price-earnings ratio of just 18. Given the company’s reasonably good growth outlook (revenue is expected to increase roughly 9% this year and next), and its impressive profitability (net income came in at $4.17 billion last year), that’s an attractive valuation. In fact, GuruFocus deems PayPal significantly undervalued.
SS&C Technologies (SSNC)
SS&C Technologies (NASDAQ:SSNC) is “the world’s largest hedge fund and private equity administrator, as well as the largest mutual fund transfer agency,” according to the company.
On Oct. 27, the company reported Q3 revenue increased 7.5% year over year to $1.3 billion, excluding currency fluctuations. While SS&C’s margins and bottom line contracted amid high inflation and a far-from-ideal investment environment, the company delivered adjusted earnings of $1.15 per share. Meanwhile, the firm’s net cash from operating activities came in at $317.1 million, while it reported operating income of $304.2 million.
As recession fears wane, expect to see heightened demand for SS&C’s offerings.
Following a 36% year-to-date decline, SSNC stock has a forward price-earnings ratio of just 10, making it one of the best cheap fintech stocks to buy now.
— Larry Ramer
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Source: Investor Place