We recently compiled a list of 10 Best Fintech Stocks to Buy in 2024.In this article, we’ll take a look at where MercadoLibre, Inc. (NASDAQ: MELI) stacks up to other fintech stocks.
Based on a collaboration between the World Economic Forum and the Cambridge Center for Alternative Finance, a report found that the global fintech sector has been strong post-pandemic, with average global customer growth rates above 50% between 2021 and 2022. In this growing market, fintechs offer tailor-made financial services and products to underserved segments of the population. These segments represent a significant portion of the consumer base of fintech companies operating in both advanced economies and emerging and developing markets.
For the second year in a row, as CNBC reports, payments are the largest industry segment with a 24% share, although it is highly fragmented with many companies moving money around the world. Alternative financing, which includes crowdfunding apps and online lenders, follows with a 16% share. Other segments and their relative shares include 14% neo-banking, 12% wealth management technology, 10% business process solutions, 10% banking solutions, 8% financial planning and 6% digital assets . Nationally, the United States is the largest fintech market, home to 46% of the top 250 fintech companies. Meanwhile, the UK hosts 12% while India is home to 4% of these businesses. India has replaced Germany and France due to its growing digital adoption.
In today’s industry landscape, fintech companies at the lower end of the scale appear to be better off. Previously, the CEO of Bank of America said that the consumer was very stable and not getting worse. On the contrary, Daniel Pinto, chief operating officer of JP Morgan Chase, warned that net interest income would be difficult next year, with expected Fed rate cuts on the horizon. Ally Financial’s chief financial officer cited worse conditions as its borrowers face a weak job market as a growing concern other than inflation.
In an interview with CNBC, Dan Dolev, senior fintech equity research analyst at Mizuho, highlighted the growing consumer credit concerns. According to him, fintech players, more exposed to low-income consumers, are doing better. He mentioned that low-end consumers had a lot of money that they were spending beyond their means. These consumers reduced their spending to repay their loans after exhausting their savings 6 or 12 months ago. Meanwhile, prime consumers now face the same pressure as subprime consumers did several months ago.
Our methodology:
In order to compile a list of the 10 best fintech stocks to buy in 2024, we first used relevant stock screeners and ETFs to compile an extensive list of relevant companies with the highest market caps. Next, we selected the top 10 stocks from our list that had the largest number of hedge fund holders. The 10 best fintech stocks to buy in 2024 have been ranked in ascending order of their hedge fund holders, as of Q2 2024.
At Insider Monkey, we’re obsessed with the stocks hedge funds are piling into. The reason is simple: our research has shown that we can outperform the market by imitating the stocks selected by the best hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A customer using their phone to access an online commerce platform.
Number of hedge fund holders:84
MercadoLibre, Inc. (NASDAQ: MELI) is Latin America’s leading financial technology and e-commerce company. With the aim of democratizing commerce and financial services in Latin America, the company was founded 25 years ago. Therefore, it enables its users to benefit from e-commerce services and digital financial services through a comprehensive suite of technology solutions. The company is present in 18 countries, including Argentina, Brazil, Mexico, Colombia, Chile and Peru.
MercadoPago, the company’s fintech platform, provides a comprehensive set of fintech services. For individuals, it has a digital account offering debit card, online payments, insurance, savings, investments and credit lines. For merchants, it provides online and physical point-of-sale payment processing services as well as a digital account. With financial services ripe for disruption in select markets, the company operates a fintech business with the lowest cost to serve in the region. This highly profitable business positions MercadoLibre for market share gains in the region. It is also building MELI+ with the aim of becoming the largest and most popular regional loyalty program. At the same time, the company is one of the leading digital commerce platforms in Latin America, a region with one of the fastest growing Internet penetration and e-commerce growth rates in the world.
The company reported strong revenue and earnings growth during the fiscal second quarter. With a 20% increase in gross merchandise volume and a 36% increase in total payments volume, revenue grew 42% year over year. Net profit increased by 103% compared to the previous year. MercadoLibre, Inc.’s (NASDAQ: MELI) strength across geographies is evident in revenue growth of 51% year-over-year in Brazil and 66% year-over-year in Mexico. Commerce and Fintech revenue streams continue to grow, with increases of 53% and 28%, respectively, since 2023. Additionally, adjusted free cash flow of $678 million in the second quarter and $838 million year-to-date demonstrates the company’s ability to generate cash even as it invests in other growth opportunities.
With a strong market capitalization of $102.91 billion, a diverse revenue mix, and significant growth potential as a leading fintech and e-commerce platform, investors may consider MercadoLibre, Inc. (NASDAQ: MELI) . The company’s past financial performance has also been consistently strong. Over the past 5 years, the company has managed to increase its revenue by 56.85% and its net profit by 145.56%. In the second quarter, the stock was held by 84 hedge funds while Generation investment management is the largest shareholder.
Overall MELI ranks 4th on our list of the best fintech stocks to buy. While we recognize MELI’s potential as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold more promise in terms of higher returns in a shorter time frame. If you’re looking for a deeply undervalued AI stock that’s more promising than MELI but trading at less than 5x earnings, check out our report on the cheapest AI stock.
