Macroeconomic uncertainty is weighing on consumer spending and therefore impacting fintech companies. That said, long-term growth for fintech companies looks promising, given the rise of e-commerce and the continued shift to digital payments. Keeping this context in mind, we used TipRanks Stock Comparison Tool place PayPal (PYPL)SoFi Technologies (SOFI)and Block (SQ) against each other to find the fintech stock that earned a Strong Buy rating from Wall Street.
PayPal shares are up more than 17% so far this year. Investors are encouraged by the company’s transition efforts to revive its business after a post-pandemic slowdown and growing competition in the fintech space from tech giants like Apple. (AAPL) and the alphabet (GOOGL).
Last month, PayPal reported strong second quarter results and raised its profit outlook for the full year. The company Adjusted EPS jumped 36% to $1.19driven by an 8% increase in revenue and an impressive growth of 231 basis points in adjusted operating margin. The margin improvement reflects the company’s restructuring efforts, including drastic cost cuts and a reduction in headcount.
Looking ahead, the company is increasing investments to support high-growth initiatives, innovation and marketing campaigns for its PayPal and Venmo brands.
On August 20, Edward Jones analyst Logan Purk reiterated a Hold rating on PayPal. Purk noted that the company’s strategy of focusing on its large accounts has resulted in consistent growth in payment volumes. However, he added that new account growth, which was expected to slow, actually declined following the adoption of this strategy.
Additionally, profit per transaction fell after initially stabilizing in previous quarters due to the rapid growth of PayPal’s low-margin Braintree offering. As a result, the analyst is discounted from the stock due to its reduced growth prospects.
Meanwhile, Daiwa analyst Kazuya Nishimura upgraded PayPal from Hold to Buy and raised the price target from $68 to $72. The analyst was optimistic about the stock, believing that the company’s initiatives are quickly generating visible results, such as Braintree’s improved profitability.
Overall, PayPal earns a Moderate Buy consensus rating based on 18 Buys and 16 Holds. The average PYPL stock price target of $75.96 implies an upside potential of approximately 5.4%.
Shares of digital banking and financial services platform SoFi Technologies fell about 23%, even as the company continues to post upbeat financial performance. Investors are concerned about the impact of high interest rates on the company’s lending activities and credit quality.
Despite a difficult context, SoFi beat second quarter estimates and raised its outlook for the full year. The company’s revenue increased 20% year-over-year to $598.6 million. In addition, the company turned to profit of $0.01 per share from a loss of $0.06 in the prior year quarter.
Additionally, the company continued to gain more customers and added 643,000 new members during the quarter. It ended the second quarter of 2024 with approximately 8.8 million members, reflecting an impressive 41% year-over-year growth.
Earlier this month, Needham analyst Kyle Peterson reiterated a Buy rating on SOFI stock with a $10 price target following meetings with company management. The analyst is bullish on SoFi Technologies, based on the company’s robust lending business, stable funding and focus on ultra-high-risk borrowers.
Peterson argued that the market underestimates the potential of the company’s technology and financial services platforms. In its second-quarter results, SoFi highlighted that financial services and technology platforms now account for 45% of its overall adjusted net revenue, up from 38% a year ago.
Overall, Wall Street has a Hold consensus rating on SoFi Technologies stock based on five Buy, seven Hold, and three Sell recommendations. The average SOFI stock price target of $8.27 implies an upside potential of nearly 8%.
Fintech company Block operates through two ecosystems: Square, which offers digital financial solutions to merchants, and Cash App, a peer-to-peer payments platform. Block stock is down about 16% year to date due to concerns about a slowdown in the company’s revenue growth rate and the impact of macroeconomic pressures on its key businesses.
That said, the stock is up more than 9% over the past month as investors recognize the company’s efforts to revive its business and improve profitability. Recently announced blockage Mixed results in the second quarter of 2024 and raised its full-year outlook to reflect its improved expectations for the remainder of the year.
Remarkably, Block’s Second-quarter adjusted EPS jumped over 132% to $0.93fueled by rising revenue and operating margin expansion. The company strives to further improve its business by streamlining its operations, improving its marketing strategy and expanding its distribution network.
On August 16, Bank of America Securities analyst Jason Kupferberg reiterated a buy rating on Block stock with a price target of $82.
Following a meeting with the company’s investor relations team, the analyst noted that the company is refocusing on improving its day-to-day execution, particularly in the Square business. He added that the company is working to reignite Square GPV (gross payment volume) acceleration, which he says is the most critical metric to drive shares higher.
Kupferberg believes the company’s new products and marketing initiatives will begin to bear fruit next year. He also said that SQ’s “high-quality business model” is undervalued by the market and that the stock is undervalued.
With 20 Buys, three Holds, and a Sell recommendation, Block stock earns a Strong Buy consensus rating. At $87.94, the average SQ stock price target implies an upside potential of 34.1% from current levels.
Among the three fintech stocks mentioned above, Wall Street is very optimistic about Block’s growth prospects. Analysts see higher upside potential for SQ stock than for PYPL and SOFI stock. Most analysts see Block’s stock decline as an attractive opportunity to gain exposure to this fintech player and benefit from its long-term growth opportunities.
