Fintech Stocks Are Lagging The Rest Of The Market – Should You Buy Or Sell?

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  • Fintech stocks have fared worse than financial and technology companies in the past year as consumer spending habits have shifted due to inflationary pressures.
  • As the pandemic-related boost to e-commerce wears off, reality has set in for many of these companies.
  • Although the fintech space may have been battered in 2022, some companies in this space could turn around their business in 2023.

It’s almost impossible to read about the stock market in 2022 without knowing how much some of the largest public companies have dropped in value. Tech giants like Apple and Microsoft have seen stock prices plummet while soaring inflation and skyrocketing interest rates have led to concerns about potential recession. Despite the terrible results in technology, the fintech field managed to have an even worse year.

Fintech companies have become popular because they have brought innovation to the classic business models of lending, investing, and payment processing. However, fintech stocks have fared poorly and outperformed both financial stocks and the tech giants.

While other financial technology companies are struggling to stay afloat, Q.ai is driving the personal wealth movement, democratizing investment for all. But here’s what’s going on in space in general.

What happened to fintech stocks?

Before we look at financial technology stocks, we must address the concept of fintech, which combines finance and technology. This generic term often refers to any business that focuses on applying new technology to the financial business. Business services in this area include payment processing, online banking, mobile banking, peer-to-peer lending, financial software, financial services, and investment services.

As the world continues to transition to a cashless world and with many people relying on simpler payment methods, we have seen the number of financial technology companies rise in the past few years.

Some of these companies were so focused on growth that they didn’t care about profit or felt that the pandemic boom would last much longer. With share prices plummeting with the stock market sell-off throughout 2022, fintech stocks have had a terrible year.

Eugene Simoni, a fintech analyst with MoffettNathanson, made the following observation about the fintech stock:

“Investors are increasingly wary of high-growth but unprofitable business models, and over the past several quarters, high-growth companies across our coverage have increasingly prioritized improving profitability in their actions and feedback.”

Which Fintech stocks are worth looking into?

While it is naturally difficult to promote companies that have seen share prices fall, it is important to keep things in perspective with the fintech industry as a whole. All stock prices as of the closing date of January 4, 2023.

PayPal Holdings Inc. (PYPL)

PayPal did well during the pandemic months when people were shopping online and using a digital payment processor. When people went back to shopping in person, PayPal saw volume decrease. The digital payments giant has also seen increased competition from Apple’s entry into the payment space. PayPal currently has 16% of the global payments market, with Apple trailing at 5%, but there’s no telling what the future holds.

The good news is that Venmo is now on Amazon’s e-commerce platform, and that should drive new business for PayPal.

PayPal shares are currently trading at $77.92 which is down nearly 58% from last year.

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Fair Isaac Corporation (FICO)

No matter how you feel about credit scores, you cannot ignore the importance of the FICO score because banks and lenders still rely on this information before making a decision about lending you money. While this isn’t technically a fintech stock like some of the others, this well-established company has been a part of the financial community for a long time.

Since the FICO score is used by lenders and companies in the financial technology space, we have to mention this. It is also one of the rare financial stocks to appreciate in 2022. The business is responsible for more than half of the company’s revenue. Even with the increase in the cost of borrowing, people are still applying for all kinds of loans.

FICO’s share price is currently $585.36, which is more than 30% higher than last year.

Block Inc (SQ)

Block went on an upward trend before 2022, and this stock has offered investors generous returns. However, the company fell as much as 60% in points throughout 2022 due to low valuations in technology and a lack of confidence in the company’s current management team. Despite all this, the mobile payments processor still posted strong quarterly earnings growth. Square grossed $783 million last quarter, which is a 29% year-over-year increase.

Block was an innovator for companies with simple credit card payment options. Square’s card reader has changed how small businesses can accept payments. The company then expanded its corporate services with loans, online payments, and payroll options. On the consumer side, Cash App has more than 49 million customers using the service per month. The payment app generated $774 million in gross profit last quarter, which is a 51% year-over-year increase.

Block’s share price is currently $70.01, down 52% from a year ago.

nCino (NCNO)

This fintech company offers cloud-based technology platforms and solutions that allow financial institutions to do better. One of the most popular solutions is a loan issuance system that helps banks manage the entire loan origination process. With large banks like Wells Fargo and Toronto-Dominion Bank using these services, there is optimism that this fintech company can sign even bigger partnerships in 2023.

nCino shares are currently trading at $26.50, which is down about 49% from last year.

Shift4 Payments Inc (four)

This is one of the few growth fintech companies that has seen its share price soar while other stocks have fallen sharply. The company provides integrated payment processing and technology solutions throughout the United States. We’ve included this fintech stock in the list due to the improved third quarter financial results that were posted. Total revenue increased 45% from last year to $547.3 million. Net income for the quarter was $46.4 million, up from a loss of $13.8 million during the same quarter a year ago.

FOUR shares are currently trading at $60.10, with the share price up nearly 7% from last year.

Here are some other notable fintech stocks to watch in 2023:

  • Visa (V). When the credit card giant released its financial results for the fourth quarter. It reported a 22% jump in revenue for the fiscal year to $29.3 billion. With interest rates rising, Visa is in a strong position for 2023.
  • SoFi Technologies Inc. (SOFI). They’ve expanded their product offerings over the past few years, but companies that focus on consumer lending have fallen sharply in the past year. There is hope that the continued trade momentum will be sufficient to overcome short-term economic struggles.
  • Robinhood Markets Inc. (HOOD). The stock is down nearly 49% from a year ago due to the usual issues and concerns about the cryptocurrency space. However, this is still one of the best investment platforms for youngsters who want an easy to use interface.

As always, we urge you to do your due diligence before investing in any fintech stock because the landscape is changing faster than ever.

Should you buy Fintech stocks?

Each company on the above list is in a unique position, and there’s no telling what the future could hold. However, now might not be the best time to invest your money in FinTech as there could be more price hikes.

Here are some other factors to consider before investing in fintech stocks.

Recession is not out of the question.

Recession talks still prevail as rates continue to be raised with the Fed making it clear that the aim is to cool the economy. Many analysts fear that a soft landing scenario is not possible and that we may enter a full recession in 2023.

A recession could mean that the entire economy is in a downturn, and every aspect of the economy will feel the impact. This will also hurt consumer confidence because people will not be motivated to spend money when they have to worry about a possible job loss. This would harm any business involved in money lending or payment processing.

Increased competition from established tech giants.

Companies in the financial services and payment processing space will see competition from Apple as we wait for the official launch of Apple Pay Later. This new service will be a buy-now-pay-later program that will be in direct competition with PayPal and other digital payment processing companies.

How should you invest?

The stock market has not been kind to fintech stocks High inflation It continues to hurt investor confidence. This means that finding stocks to put your money into is a difficult task at best, and there are many risks involved in investing right now.

There are ways to make your portfolio more defensive and less risky. Take a look at Q.ai’s inflation group or Precious metal kit, and protect your investment from depreciation so you don’t have to worry about checking market reports daily. Better yet, you can activate Wallet protection at any time to protect your gains and reduce your losses.

bottom line

As we have explained in previous articles, 2022 was a rough year AI stocksTechnology stocks, especially financial technology stocks. One can be optimistic about the future, but it is more important to be realistic when it comes to money. If the economy can recover in 2023, there is hope for a comeback in fintech stocks. However, we can’t ignore the fact that many of these companies simply became too focused on growth during the pandemic months when consumer spending habits were changing and they didn’t keep pace with profitability.

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