There’s never been a better time to explore investment opportunities with companies that offer financial technology. Also known as fintech companies, these businesses are revolutionizing the way that the world handles financial transactions. We’ve been steadily heading towards using digital payments technology exclusively over the last decade, and there are several trends this year that has accelerated its widespread adaptation.
It’s hard to imagine that things like contactless payments, e-commerce, and digital transactions will be going away any time soon. That’s why investors should be looking at the best fintech stocks to add to their portfolios to capitalize on growing trends in the business world. Below, we’ve put together a list of the 3 best fintech stocks to buy now to offer valuable insight into which of these groundbreaking businesses should continue to experience sustained growth going forward.
If you are interested in adding a diversified fintech company to your portfolio, Fiserv is one of the premier options to consider. It’s a leading global provider of financial technology and services for merchants, banks, and capital market firms and has proven to be a resilient business throughout the pandemic. Fiserv offers its clients services such as electronic payment processing, internet banking, and account processing services. Most of this company’s revenue is generated from recurring transaction-based fees from contracts that typically have terms ranging from three to five years. That means that the company’s earnings are relatively stable.
Fiserv notably acquired First Data back in 2019 and should start seeing synergies from the merger sooner rather than later. Q3 earnings for the company were strong, as it reported revenue growth of 21% year-over-year and 79% year-to-date. Fiserv also raised its full-year 2020 guidance and EPS outlook, signaling to investors that it should have another strong quarter in Q4. The stock recently received a boost thanks to an announcement that the company has approved a share buyback program of 60 million shares. While share buyback programs can have their downsides, they generally signify that the company views their stock as undervalued at current market prices and can lead to boosted share prices in the short-term. The stock hasn’t rallied this year like other companies in the space due to lower consumer activity related to the pandemic, which means it trades at a reasonable valuation relative to its peers.
Many investors consider Paypal to be the gold standard in fintech. It’s a company that was initially spun-off from Ebay and offers an innovative way to handle digital and mobile payments for consumers and merchants around the world. It earns the vast majority of its revenue by charging fees for each completed payment transaction, which is one of the big reasons why it’s worth a look at this time. Payment volumes have been rapidly accelerating, and the company reported total payment volume of $247 billion in Q3, an increase of 38% year-over-year.
With over 361 million active users globally, it’s clear that Paypal has a massive footprint worldwide. One of the big competitive advantages that this company has is its strong international presence, with over 100 million users located outside of the United States. Paypal also continues to make smart investments in new fintech companies including the recent acquisition of online shopping tool Honey Science Corp for $4 billion in cash. Paypal also recently announced that it is launching a new service that allows its customers to buy, hold, and sell cryptocurrency directly from their Paypal accounts, another move that could reward shareholders in the long-term. The stock is up over 70% year-to-date but has pulled back roughly 11% from its highs, providing investors with an attractive entry point at this time.
Last on our list is a lesser-known fintech company based in Brazil that is fulfilling a major need for financial technology solutions in an emerging market. StoneCo has developed a cloud-based technology platform that allows businesses to conduct electronic commerce in-store, online, and on mobile channels. Businesses in Brazil will continue to digitize over the next decade and a company like StoneCo could play a crucial role in helping to make that happen. American Express believes that roughly 85% of transactions in Latin America are still handled with cash, which tells us that a company like StoneCo has a massive addressable market.
StoneCo has seen strong growth this year and recently delivered convincing Q3 earnings which saw total payment volume increase by 114% year-over-year. The company also reported Q3 revenue and net income increases of 39% and 43% year-over-year, respectively. These are strong numbers given the dire economic circumstances in Brazil, confirming that this company is executing at a high level. It’s also worth noting that Warren Buffett’s Berkshire Hathaway has a stake in the business. While this stock is trading at a premium valuation and is up over 60% year-to-date, the huge opportunity it has to permanently change the way payments are handled in Brazil make it one of the more intriguing fintech companies to own.
Before you consider PayPal, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and PayPal wasn't on the list.
While PayPal currently has a "Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.
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