When it comes to the fintech space, most people are focused on Square (SQ), PayPal (PYPL), and the other top players in the sector.
However, there are some lesser-known fintech stocks worthy of investor consideration. The bottom line is this is a highly competitive space with more than enough room for several players.
Below, we provide a look at two intriguing fintech stocks that don’t receive nearly enough attention: PagSeguro Digital (PAGS) and Zuora (ZUO).
PAGS by the Numbers
PAGS started 2020 in the mid-$30s, dropped below $15 during the start of the pandemic, and has been gradually moving higher ever since. In fact, PAGS has moved beyond its pre-COVID trading price in recent months, soaring all the way to $50.
This Brazil-based fintech company is beloved by analysts, who have established an average price target of $65 for the stock, indicating a potential upside of 32%. Though PAGS has a fairly high forward P/E ratio of 48.44, it is trading within $10 of its 52-week high of $59.38.
PAGS is Poised to Pop
Though PAGS suffered a setback as a result of the pandemic, the economic recovery on the horizon will likely buoy the stock. There is a good chance Brazil and other countries within Latin America will experience an economic rebound in the months ahead, setting the stage for this fintech company to pass through the current headwinds and emerge at some point in better shape.
Enthusiasm for PAGS is growing following its partnership with the insanely popular TikTok social media platform. The partnership sets the stage for TikTok users to check their PAGS PagBank balance through the platform. Furthermore, PAGS bought a Brazilian payment processing business known as Wirecard, a move that will facilitate economic transactions all the more. Though PAGS is not the sole player in the Latin American payment processing space, the market should continue to grow.
ZUO by the Numbers
Check out ZUO’s chart, and you will find the stock was chugging along quite nicely until the start of the pandemic. ZUO dipped from $16 down to $7 in mid-March. However, ZUO rallied in the months that followed, steadily increasing. ZUO bounced all the way up to $16 in early September. The stock subsequently dipped back down to $9, moved sideways, and has been on the rise since November.
Analysts are bullish on ZUO, setting an average price target of $19 for the stock, indicating a potential upside of 30%.
The Case for ZUO
ZUO is a particularly intriguing company as it sells the software necessary for businesses to convert to subscription-based services. This is accomplished through the cloud. Now that the pandemic could start winding down with the vaccine rollout, ZUO’s prospective clients have fewer obstacles standing in the way. Once the economy picks back up, ZUO’s prospective clients will be much more inclined to transition to the company’s software.
Furthermore, ZUO has demonstrated success amidst the pandemic, hiking its customer count by nearly 15% on a year-over-year basis. Furthermore, transaction volume on the company’s platform is up more than 25%.
What About the POWR Ratings?
ZUO has an overall POWR Ratings grade of B, yet it is ranked in the top 50 out of 260 stocks in the Financial Services (Enterprise) industry. ZUO has B grades in the Trade Grade and Industry Rank POWR Ratings components.
PAGS fares a little better in the POWR Ratings with an A grade in the Trade Grade component and B grades in the Peer Grade, Buy & Hold Grade, and Industry Rank components. Of the 260 stocks in the Financial Services (Enterprise) industry, PAGS is ranked 34th.
If you have to choose only one of these stocks, ZUO is likely the better of the two. It is no secret that subscription-based businesses are money-makers, largely because customers tend to “set it and forget it” when paying for subscriptions. This means they are likely to allow the recurring charges to continue across posterity. It’s precisely why ZUO is the better play.
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PAGS shares were trading at $48.56 per share on Thursday morning, up $1.59 (+3.39%). Year-to-date, PAGS has declined -14.63%, versus a 0.91% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...
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