Due to the increasing demands of consumers regarding managing money, making payments, and accessing credit with minimum hassle, the fintech industry is gaining momentum as it integrates financial services within non-financial environments. According to some reports, nearly 90% of Americans use fintech applications to manage their financial lives.
Neo banks, buy-now-pay-later (BNPL), embedded finance, digital banking, platform-as-a-services (PaaS) solutions, and several other fintech trends are expected to fuel the industry’s growth this year. The global financial services market is expected to reach $26.5 trillion this year, and the global fintech market is expected to grow at a 23.58% CAGR through 2025.
Given this backdrop, Wall Street analysts expect fintech stocks Block, Inc. (SQ), Affirm Holdings, Inc. (AFRM), Robinhood Markets, Inc. (HOOD), and Upstart Holdings, Inc. (UPST) to soar in price in the coming months due to their solid growth prospects.
Block, Inc. (SQ)
SQ is a San Francisco-based technology company that focuses on financial services that enable sellers to accept card payments and provide reporting, analytics, and next-day settlement. The company’s building blocks comprise Square, Cash App, Spiral, TIDAL, and TBD54566975. SQ also offers various software products, including Square Point of Sale; Square Appointments; Square for Retail; and other online platforms and dashboards.
This month, SQ launched on-demand delivery for Square Online orders in Canada through DoorDash Drive, DoorDash’s white-label fulfillment platform that powers direct delivery for any business. Through this delivery service, SQ has provided a new solution for Canada’s food and beverage industry to maximize its business in 2022.
SQ’s total net revenue increased 26.7% year-over-year to $3.84 billion for the third quarter, ended Sept. 30, 2021. The company’s gross profit grew 42.6% from its year-ago value to $1.13 billion. And its operating income came in at $22.99 million.
Analysts expect SQ’s revenue to increase 5.8% year-over-year to $18.66 billion in its fiscal 2022. The company has an impressive earnings surprise history; it has beaten the consensus EPS estimates in three of the trailing four quarters. Its EPS is estimated to grow 101.2% in fiscal 2021 and 9.5% in fiscal 2022.
Closing yesterday’s trading session at $117.3, the $257.59 average analyst price target represents a 119.6% potential gain.
Affirm Holdings, Inc. (AFRM)
AFRM is a digital and mobile commerce platform in the United States and Canada. The San Francisco-based company offers a technology-driven payments network that allows consumers to pay, select repayment options, and issue loans. Also, AFRM’s platform includes three elements—a point-of-sale payment solution, merchant commerce solutions, and a consumer-focused application.
AFRM’s total revenue increased 54.8% year-over-year to $269.39 million for its fiscal first quarter. The company’s interest income grew 116.3% from the year-ago value to $117.3 million. Also, its cash and cash equivalents were $1.44 billion during the period.
AFRM’s revenue is expected to increase 46.2% year-over-year to $1.27 billion in its fiscal year 2022. Its EPS is estimated to grow 21.7% in fiscal 2021 and 42.7% next year.
The $130.77 consensus price target represents a 124.5% potential gain from its $58.25 last closing price.
Robinhood Markets, Inc. (HOOD)
HOOD in Menlo Park, Calif., is a financial service platform that allows users to invest in stocks, exchange-traded funds (ETFs), options, gold, and cryptocurrencies. The company’s platform offers trading in U.S.-listed stocks and ETFs and related options, and American depositary receipts (ADRs), and cryptocurrency trading through its subsidiary, Robinhood Crypto, LLC (RHC). In addition, it offers various learning and education solutions.
HOOD’s total net revenues increased 35.4% year-over-year to $364.92 million. The company’s cash and cash equivalents came in at $1.4 billion during the period.
For its fiscal year 2022, HOOD’s revenue is estimated to be $2.27 billion, representing 23.2% year-over-year growth. Analysts expect HOOD’s EPS to increase 89.8% in fiscal 2022.
Currently trading at $13.12, the $31.23 average analyst price target represents a 138% potential upside.
Upstart Holdings, Inc. (UPST)
UPST is a leading artificial intelligence (AI) lending platform that has been designed to access affordable credit at low risk and cost. The San Mateo, Calif., company’s platform connects consumers, banks, and institutional investors through a shared AI lending platform. Also, UPST has built a configurable, multi-tenant cloud application designed to integrate seamlessly into a bank’s existing technology systems.
This month, UPST partnered with AgFed Credit Union (AgFed), a Washington D.C.-based credit union, to provide personal loans to better reach new members in the communities where AgFed serves. The companies will offer personal loans to new and current members nationwide through this partnership. Also, UPST will be helping AgFed to lend and to serve more creditworthy borrowers.
UPST’s total revenue increased 249.5% year-over-year to $228.45 million for the third quarter, ended Sept. 30, 2021. The company’s income from operations grew 134.3% from its year-ago value to $28.59 million. Its net income rose 201.1% from the prior-year quarter to $29.11 million. Also, the company’s EPS increased 200% year-over-year to $0.3.
Analysts expect UPST’s revenue to increase 49.9% year-over-year to $1.21 billion in its fiscal 2022. The company has surpassed the consensus EPS estimates in each of the trailing four quarters. Its EPS is estimated to grow 747.8% in fiscal 2021 and 20.5% in fiscal 2022. The stock has soared 41.7% in price over the past year.
Closing yesterday’s trading session at $91.36, the $244.78 average analyst price target represents a 167.93% potential gain.
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SQ shares were trading at $109.76 per share on Tuesday morning, down $7.54 (-6.43%). Year-to-date, SQ has declined -32.04%, versus a -9.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research. More...
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