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Wednesday, September 28, 2022

7 Fintech Stocks to Buy for Royal Returns

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In 2021, companies within the fintech sector raised well over $120 billion. Roughly $1 out of every $5 of venture capital funding went to a fintech startup. Clearly, many large investors were enthusiastic about fintech firms. For those who also want to get on this bandwagon, I will present seven fintech stocks to buy for royal returns.

However, macroeconomic challenges and a looming recession have restrained fintech stocks through the first nine months of 2022. Specifically, the KBW Nasdaq Financial Technology Index has lost 27.5% so far this year.  By comparison, the S&P 500 index has declined 18.7%.

Yet the sharp retreat of fintech shares has made the valuation of many of these names more attractive, creating compelling buying opportunities for growth investors. Moreover, the long-term outlook of the fintech space still appears to be attractive. That’s because of the continued rise of e-commerce and the growing adoption of mobile payments.

With that said, here are the seven fintech stocks that could generate long-term returns.

BILL Bill.com $142.06
FISV Fiserv $102.17
FINX Global X FinTech ETF $22.16
INTU Intuit $417.82
MELI Mercado Libre $905.69
PYPL PayPal $91.63
PATH UiPath $13.79

Bill.com (BILL)

A concept image of mobile payment with a smart phone for a cup of coffee.

Source: Shutterstock

Payment processing platform Bill.com (NYSE:BILL) offers cloud-based financial solutions for small- and mid-sized companies. Its software platform uses artificial intelligence (AI) to streamline complex back-office financial operations.

Bill.com released strong fiscal Q4 and full-year results on Aug. 18. Its revenue jumped 156% year-over-year to $200.2 million. Investors were also pleased by the significant YOY decline in its loss per share, excluding some items, and by the meaningful growth of its total payment volume.

Meanwhile, Bill.com is focused on growing its operations, as it acquired the accounts receivable software provider Invoice2go and the budgeting and expense management tool Divvy. For fiscal 2023, Bill.com anticipates that its revenue will rise around 50%, an increase that investors would view favorably.

BILL stock has fallen 43% in 2022. The shares trade for 23.6 times the company’s sales. Analysts’ 12-month median price target for Bill.com stock stands at $220.

Fiserv (FISV)

The Fiserv (FISV) sign is seen at its office in Beaverton, Oregon

Source: Tada Images / Shutterstock.com

Payments processing company Fiserv (NASDAQ:FISV) markets its Clover payment processing hardware, while its software enables small businesses to accept credit cards in their stores.

Within the computer processing service segment, Fiserv’s market share is over 7.7%. By comparison, the respective market shares of Bank of America (NYSE:BAC) and Citigroup (NYSE:C) are about 41.5% and 33.5%.

Fiserv announced its Q2 financials results on July 26. Its revenue grew 10% YOY to $4.45 billion.  In 2022, Fiserv anticipates that its revenue will continue to rise by upper-single-digit percentages.

FISV stock is currently down 1.8% this year. The shares are trading at 14 times Fiserv’s forward earnings and four times its sales. Analysts’ 12-month median price forecast for Fiserv stock is $127. Given the volatility of tech stocks these days, FISV stock could fall below $100 in the near term, creating a better entry point for investors.

Global X FinTech ETF (FINX)

Online banking businessman using smartphone with credit card Fintech and Blockchain concept

Source: Joyseulay / Shutterstock.com

Next up on our list is an exchange-traded fund. Specifically, it’s the Global X FinTech ETF (NASDAQ:FINX). The ETF offers broad exposure to global fintech companies and focuses on mobile payments, lending, blockchain, cryptocurrencies, financial software, crowdfunding, and enterprise software solutions. The fund started trading in September 2016.

FINX currently owns 67 assets. Its top ten holdings account for over half of its net assets of $568 million. Over 80% of the stocks that it owns are in the information technology sector.

Among the leading stocks that it owns are Paypal, Fiserv, Block (NASDAQ:SQ), Intuit, and the Netherlands-based mobile payments specialist Adyen (OTCMKTS:ADYEY).

So far in 2022, FINX has declined 44%, and it hit a 52-week low in mid-June. Due to the selloff of fintech stocks, many shares owned by FINX currently trade at lower valuations than last year.

The ETF’s trailing price-earnings and price-book ratios stand at 34.18 times and 2.77 times, respectively.

Intuit (INTU)

An image of Intuit Turbotax books

Source: dennizn / Shutterstock.com

Intuit (NASDAQ:INTU) offers financial management and compliance products and services, It is well-known for TurboTax and QuickBooks. The company boasts a market capitalization of about $120 billion, and most of its users live in the U.S. and Canada.

The financial management platform provider reported Q4 and full-year metrics on Aug. 23. Although its revenues declined 6% YOY to $2.4 billion, investors were pleased with the increase in the firm’s long-term revenue guidance for its key Small Business unit.

Intuit has made some key acquisitions in recent years, paving the way for rapid top-line growth. The Credit Karma and MailChimp transactions have led to significant synergies within its small business ecosystem.

Although a recession may be looming, Wall Street expects the cross-selling strategy to increase the value of INTU stock in the coming quarters.

INTU stock has lost 35% so far this year. The shares are trading at 30.8 times Intuit’s forward earnings and 9.4 times its book value. Analysts’ 12-month median price forecast for Intuit stands at $550.

Mercado Libre (MELI)

MercadoLibre (MELI) homepage on a smartphone

Source: rafapress / Shutterstock.com

Latin American e-commerce giant Mercado Libre (NASDAQ:MELI) has a network of over 130 million active buyers and 1 million sellers. Meanwhile, its fintech platform, Mercado Pago, is currently among the most popular digital wallets in the region. The company also operates a logistics service and a business-lending platform.

Recent research suggests that the fintech sector is growing rapidly in Latin America and the Caribbean. Lifted by rising income levels and digitalization trends. e-commerce is also growing meaningfully in Latin America.

Mercado Libre issued its Q2 results on Aug. 3. The company’s revenue increased 57% YOY to $2.6 billion. Investors were delighted that the firm’s MercadoPago payments business has become a key growth driver for the company, as its total payment volume soared to $30.2 billion.

So far in 2022, MELI stock has declined 33%. However, it is currently in recovery mode, as it’s up more than 50% over the past three months. The shares are trading at 81.3 times MELI’s forward earnings and just 5.2 times its sales.

Wall Street’s 12-month median price forecast for the stock is $1300.

PayPal (PYPL)

PayPal logo and front of headquarters

PayPal’s (NASDAQ:PYPL) platform facilitates payments for global consumers and merchants. Among its offerings are the PayPal platform as well as Venmo and Braintree. Recent metrics suggest that PayPa’s market share in the global payment technology segment is over 41%.

The mobile payment company released its Q2 results on Aug. 2. Although its revenues grew to $6.8 billion, its EPS declined. Wall Street paid close attention to the ambitious cost-cutting measures that the company plans to undertake in FY22 and FY23. Investors would also like to see PayPal enter new markets by taking steps such as expanding its Buy Now and Pay Later (“BNPL”) payment option.

PYPL stock has lost more than half of its value since January. The shares are trading at 19.7 times its forward earnings and 4.2 times its sales. Analysts’ 12-month median price forecast for PYPL stock stands at $120.

UiPath (PATH)

A magnifying glass zooms in on the website homepage of UiPath (PATH).

Source: dennizn / Shutterstock.com

Our final fintech stock is software maker UiPath (NYSE:PATH). It focuses on robotic process automation (RPA), also known as bots, which can help streamline business operations. In other words, users rely on UiPath’s software to eliminate repetitive tasks and increase the productivity of their employees.

The RPA specialist announced its fiscal Q2 financial results on Sept. 6. Although its revenue increased 24% YOY to $242.2 million, UiPath reported a per-share loss, excluding certain items, of 2 cents. However, Wall Street was pleased that UiPath’s existing customers increased their spending by double digit-percentage levels, while its gross margins still remain strong.

PATH bulls believe that its software has an important role to play as manufacturing becomes increasingly automated and factories become smarter. Recently, UiPath has been recognized as one of the leaders in the RPA space. Its leading competitors include SS&C Technologies (NASDAQ:SSNC), Automation Anywhere and Microsoft (NASDAQ:MSFT).

PATH stock has crashed 68% so far in 2022. As a result, the shares are trading at a modest valuation of just 7.6 times its sales. Meanwhile, analysts’ 12-month median price forecast for Uipath is $18.25.

On the date of publication, Tezcan Gecgil, Ph.D., did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.

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