Fintech, or financial technology, is a sector that has been growing rapidly in recent years, offering innovative solutions for payments, banking, lending and investing. The best fintech stocks leverage digital platforms, data analytics, artificial intelligence and other technologies to provide faster, cheaper and more convenient financial services to consumers and businesses.
Of course, not all fintech stocks have performed well in the market lately. Some of them have faced challenges such as increased competition, regulatory uncertainty, operational issues or market volatility. In this article, we will look at three fintech stocks that have generally underperformed the market, but have strong fundamentals and growth potential that could make them attractive investments in September 2023.
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Different from your typical card issuers or payments enablers, Marqeta (NASDAQ:MQ) provides card and payments processing infrastructure to online merchants. The company does this by enabling businesses to create customized and flexible payment cards and wallets for their customers, partners and employees. Moreover, Marqeta’s platform supports various use cases such as e-commerce, gig economy, digital banking, B2B payments and more.
Back in June 2021, Marqeta went public in a blockbuster IPO that raised more than $1.2 billion from primary investors. While the fintech infrastructure platform was able to raise funds effectively priced at $27 per share, the market has not been so kind since then. Marqeta currently trades at $6.26 a share, which is well below its IPO price. Truly, there are a number of factors at play here. The stock was beaten up last year at the height of the Federal Reserve’s campaign to bring down inflation with steep rate hikes. A deteriorating macroeconomy has not helped in terms of revenue guidance.
However, Marqeta still has a lot of room for growth in the payments processing solutions market, which is expected to reach a size of $139.9 billion in 2030. Marqeta also recently extended a partnership with Block (NASDAQ:SQ) to continue powering its popular Cash App product. This partnership coupled with the fintech firm’s list of well-established enterprises, such as Uber (NYSE:UBER), DoorDash (NYSE:DASH), Affirm (NASDAQ:AFRM) and Instacart should give investors hope for the future.
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Block, formerly known as Square, is a pioneer in the fintech space in the United States that offers a range of products and services for small to medium-sized businesses (SMBs) and individuals. The company had its beginning in offering point-of-sale (POS) systems and payment processing solutions for merchants but has now broadened its ecosystem to include e-commerce tools, payroll services, business loans and banking services. Block also owns Cash App, a popular peer-to-peer (P2P) payment app that allows users to send and receive money, buy and sell stocks and cryptocurrencies and access other financial services.
Block’s shares are down 10.83% year-to-date and 15.01% over the past 12 months. After a damning Hindenburg report about the payments processor possibly inflating its Cash App user metrics and subsequent downgrades by market research analysts, it is easy to see why.
However, Block still has a lot of potential to grow its revenue and profitability in the long term. The company does boast a large and loyal customer base of over 44 million monthly active users for Cash App. Further, Block raised profitability guidance for the full year, which means despite the macro environment harming overall demand for Block’s products, the company is trying to maintain operational efficiency. As the United States economy improves, so should Block’s shares and investors ought to take notice now.
Though Fiserv (NYSE:FI) is seen as a legacy financial services platform, its role as a global leader in providing solutions for payments, processing, core banking, risk management and compliance should not be understated. In fact, Fiserv’s shares are the best performing on this list, after having appreciated 21% since the start of the year. The legacy fintech platform has added over 12,000 clients to its platform, including banks, credit unions, merchants, corporations and governments in more than 100 countries.
After a solid second quarter earnings beat, there are a lot of things shareholders, existing and potential, should be hopeful about, as Fiserv has ample opportunity to grow its revenue and earnings in the future. A robust pipeline of new products and enhancements such as Clover, Zelle, Carat and DNA that could drive organic growth and cross-selling opportunities. In their recent earnings print, organic revenue growth came in at 10% year-over-year, leading the company to increase its organic revenue growth guidance.
For investors desiring an older yet growing fintech platform, they should give Fiserv a serious consideration.
On the date of publication, Tyrik Torres 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.
Tyrik Torres has been studying and participating in financial markets since he was in college, and he has particular passion for helping people understand complex systems. His areas of expertise are semiconductor and enterprise software equities. He has work experience in both investing (public and private markets) and investment banking.
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