Continuing with our theme on world trends to look at when investing, today we focus on the Fintech industry. There has been a growing and continuous trend in digital payment around the world which has been further accelerated by online transactions during this pandemic.
It has been forecasted that digital wallets will represent 51% of global e-commerce transactions by 2024. Furthermore, Fintech companies are now enabling cryptocurrency payments as well, especially bitcoin, on their platforms which is attracting more users everyday.
Here we cover several key players worth investing in due to the size of their customer base, innovation & ease of use, as well as forecasted growth.
PayPal Holdings Inc (PYPL)|NYSE|USD264.65|1st October 2021 Closing|Medium to Long Term Investment
Paypal is one of the most popular & largest e-commerce payment enabler in the world today with a market cap of USD310 billion. It continues to expand its services and has recently enabled payment through cryptocurrencies like bitcoin, ethereum & lite coin for its US e-commerce customers. It recently launched a Buy Now Pay Later (BNPL) service called Pay in 4, which enables customers to pay in 4 instalments. Keeping with increasing consumer demand for BNPL. PayPal has a complete offering with digital payments, crypto and BNPL.
Its stock price is currently off its July peak from USD309.00 to USD264.65 and may still seem expensive with a price earning ratio (P/E) of 64.63 . However, any minor correction between 5%-10% from this price will be a good entry point for long term investors.
Square Inc (SQ)|NYSE|USD239.29|1st October 2021 Closing|Medium to Long Term Investment
Square enables sellers to accept card payments and provides reporting and analytics, and next-day settlement. It competes with PayPal to a large extend. It recently acquired Afterpay, an Australian company who is one of the largest BNPL companies in the world with 16million users and over 100000 vendors across Australia, New Zealand, U.K. , U.S. & Canada. Its stock is 20% of it August peak when it announced the purchase of Afterpay. Its current valuation is a reasonable entry point for long term investors. Square has a forecasted earnings growth of over 37% per year by analyst. Although some of that growth potential is already reflected in its stock price but with its recent selloff it makes this stock rather attractive.
Affirm Holdings Inc (AFRM)|Nasdaq|USD117.85|1st October 2021 Closing|Medium to Long Term Investment
Affirm is a digital and mobile commerce enabler through its technology driven payments network and partnership with banks. Its main service being a Buy Now Pay Later(BNPL) platform linked to its bank partners. It offers a point-of -sale solution to vendors, merchant commerce solutions; payment gateway with BNPL and crypto payment applications and consumer applications like a digital wallet , savings accounts and more. Affirm is not profitable currently and is forecasted to generate profits between 2-3 years from now. However it has a massive forecasted growth of 31%-40% per year over the next 3 years according to many analyst. The company earnings grew 70.8% over the past year. The stock is trading close to its September highs. Investors should get in after a correction. Any price between USD100.00 - 105.00 is a buy opportunity.
Fiserv Inc (FISV)|NYSE|USD109.78|1st October Closing| Medium to Long Term Investment
Fiserv provides digital payment and financial technology services worldwide which includes digital banking solutions, merchant acquiring & processing, a cloud based POS system, digital payment services for e-commerce & Fintech solutions for financial insititutions. This stock the most undervalued of the list here with a potential upside of 30%. Earnings grew 35.5% last financial year and forecasted to grow approximately 33% per year over the next 3 years.
The segment will not be complete without us listing at least one ETF in the Fintech space. Our pick is :
Global X FinTech ETF (FINX)|Nasdaq|USD48.64|1st October Closing|Medium to Long Term Investment
FINX has Paypal, Adyen NV ( a dutch based finch company),Fiserv, Afterpay & Square amongst its top 10 holdings. It has a diversified holding of innovative Fintech players worldwide. If you are looking for a less volatile option for investment in this segment with 5-7% return per annum, then this is a good ETF to own .