Even though the prolonged low-interest rate environment and rising uncertainties regarding the pace of global economic recovery are unfavorable for financial services companies, increasing financial transactions and capital market activities have been helping the industry attract increased investor attention lately. This is evidenced by the Financial Select Sector SPDR ETF’s (XLF) 5% gains over the past month compared to the SPDR S&P 500 Trust ETF’s (SPY) 1.8% returns.
Furthermore, the Federal Reserve could raise interest rates as soon as early 2023 and recently indicated its willingness to reduce asset purchases before the end of the year, moves that should be a boon for the financial services industry. Moreover, the industry is expected to benefit from the continued integration of advanced technologies. According to a Globe Newswire report, the global financial services market is expected to grow at a 9.9% CAGR to hit $22.5 trillion this year.
Given the financial services industry’s promising prospects, Wall Street analysts are highly optimistic about the upside potential of 360 DigiTech, Inc. (QFIN) and Patria Investments Limited (PAX). So, we think it could be worth adding these names to one’s watch list now.
360 DigiTech, Inc. (QFIN)
Headquartered in Shanghai, China, QFIN operates a digital consumer finance platform under the 360 Jietiao brand. Its platform provides online consumer finance products to borrowers funded by institutional partners.
On August 9, 2021, QFIN announced that its 360 Jietiao app was being restored to app stores for downloads. It was earlier temporarily taken offline by the Cyberspace Administration of China. The company said the temporary suspension of new downloads did not have a materially adverse impact on its operations.
QFIN’s total revenue increased 19.8% year-over-year to $619.76 million for the second quarter, ended June 30, 2021. The company’s operating income came in at $287.01 million, representing an 86.6% year-over-year increase. While its net income increased 76.6% year-over-year to $239.74 million, its EPS came in at $0.74, up 67% year-over-year.
Analysts expect QFIN’s EPS and revenue to increase 722.9% and 630.9%, respectively, year-over-year to $31.68 and $15.39 billion, in its fiscal year 2021. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters.
The stock has gained 81.8% in price year-to-date to close yesterday’s trading session at $21.44. Wall Street analysts expect the stock to hit $40.05 in the near term, which indicates a potential 86.8% upside.
Patria Investments Limited (PAX)
Based in Grand Cayman, the Cayman Islands, PAX is a private market investment firm focused on investing in Latin America. The company offers asset management services to investors, focusing on private equity funds, infrastructure development funds, co-investments funds, constructivist equity funds, and real estate and credit funds.
On August 19, 2021, PAX agreed to its full divestment of Centro de Imagem Diagnosticos S.A. (“Alliar”) through a private sale. The sale of Alliar represents a significant step towards completing the divestment process of its Private Equity Fund III, a 2007 vintage fund that has generated top quartile returns for its vintage in Latin America and emerging markets.
The company’s revenue increased 383.7% year-over-year to $119 million for the second quarter, ended June 30, 2021. Its gross profit grew 345.9% year-over-year to $75.80 million. PAX’s net income came in at $73.4 million, up 456.1% year-over-year.
For its fiscal year 2021, analysts expect PAX’s EPS and revenue to increase 90.4% and 88%, respectively, year-over-year to $0.99 and $216.20 million.
Over the past three months, the stock has gained 3.1% in price to close yesterday’s trading session at $16.02. Wall Street analysts expect the stock to hit $32 in the near term, indicating a potential 99.7% upside.
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QFIN shares were trading at $21.82 per share on Wednesday afternoon, up $0.38 (+1.77%). Year-to-date, QFIN has gained 85.07%, versus a 20.94% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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