We recently compiled a list of 10 Best Fintech Stocks to Buy in 2024.In this article, we’ll take a look at where Block, Inc. (NYSE:SQ) stacks up against 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).
People using the Cash app pay for goods and services, highlighting the impact of the company’s payment tools.
Number of hedge fund holders:59
Block, Inc. (NYSE: SQ) is a technology company focused on financial services. It is made up of Square, Cash App, Spiral, TIDAL and TBD, all of which help people overcome barriers to entry into the economy. Square offers an integrated ecosystem of commerce solutions, business software, and banking services for sellers to grow their businesses, while Cash App lets you send, spend, or invest money in stocks or shares. cryptocurrencies. Spiral advances the use of Bitcoin by creating and funding free open source projects, while TIDAL is a platform for musicians and their fans. TBD, it facilitates access to Bitcoin and other blockchain technologies.
Block, Inc.’s (NYSE:SQ) growth remains on the scale of the company’s addressable market expansion over time. While Square represents a gross profit opportunity of approximately $130 billion, Cash App represents a gross profit opportunity of nearly $75 billion in the United States. So the key activities are strong. Supported by strong banking software and products, Square cohorts as a whole saw positive gross profit retention in 2023 compared to 2022, representing recurring revenue streams. Additionally, gross profit from international markets increases in Square’s overall gross profit. With Cash App, the company has shown growth in various product areas including Bitcoin, financial services, instant deposit and BNPL platform.
The company had a strong second quarter with gross margin up 20% year-over-year. Square’s gross profit increased 15% year over year, while Cash App’s gross profit climbed 23% year over year, illustrating the strength of these key businesses. Adjusted operating profit increased 16-fold over one year. Recently, Block decided to reorganize its hierarchical structure by function for better collaboration between different ecosystems. For the 12 months ending June 2024, Block had $1.43 billion in adjusted free cash flow, almost double from the prior year.
The company’s potential for continued growth and profitability, as mentioned above, its ability to generate substantial free cash flow, and its strategic shift toward a functional organizational structure make it attractive to investors. Block, Inc. (NYSE:SQ) had 59 hedge fund holders in Q2 2024. Catherine D. Wood’s ARK Investment Management was the largest shareholder of these hedge funds.
Overall QoS ranks 9th on our list of the best fintech stocks to buy. While we recognize SQ’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 SQ but trading at less than 5x earnings, check out our report on the cheapest AI stock.
