The evolution of financial technology or fintech has over the past few years has made banking, investing, and financial transactions more convenient and efficient. And the COVID-19 pandemic has accelerated the pace of digitization in the financial sector, ushering in the era of fintech. JPMorgan Chase & Co. (JPM) strategists have deemed fintech innovations the ‘real COVID-19 story,’ the emergence of which is bolstered by greater demand for digital transformation.
China has developed a prototype aimed at eliminating the need for paper currency, and the United States is expected to follow suit. In collaboration with MIT, the Federal Reserve Bank of Boston is developing a Central Bank Digital Currency prototype. These initiatives bode well for fintech companies.
With continuing innovations and increasing utility, the global fintech market is expected to reach $190 billion by 2026, growing at a 13.7% CAGR. Therefore, we think fintech stocks Upstart Holdings, Inc. (UPST), SoFi Technologies, Inc. (SOFI), and LendingClub Corporation (LC), which have surged more than 10% in price in the past week, could be worth adding to one’s watchlist now.
Upstart Holdings, Inc. (UPST)
UPST operates a cloud-based artificial intelligence (AI) platform that connects individuals, banks, and institutional investors that are seeking to increase access to credit and reduce risk and cost. The San Mateo, Calif., company went public through a traditional IPO process on December 16, 2020.
On October 13, UPST partnered with Kentucky-based credit union facility, Abound Credit Union, for digital lending. The addition of the credit facility in the Upstart Referral Network might expand UPST’s reach in Kentucky and enable UPST to enhance its services.
On October 6, the company announced the launch of its Upstart Auto Retail software, which includes AI-enabled financing. This new software is expected to provide a superior car buying experience for both consumers and dealerships.
In the second fiscal quarter, ended June 30, UPST’s total revenue increased 1,017.7% year-over-year to $193.95 million. Its contribution margin rose 20 percentage points from the prior-year quarter to 52%. Its adjusted net income was $58.49 million, while its adjusted net income per share stood at $0.62, both registering a substantial rise from their negative year-ago values.
A $0.22 consensus EPS estimate for the current quarter (ending December 2021) indicates a 214.3% year-over-year improvement. Likewise, the $220.58 million consensus revenue estimate for the current quarter reflects a 154.4% rise from the prior-year quarter. Furthermore, UPST has an impressive surprise earnings history; it has topped consensus EPS estimates in each of the trailing three quarters.
The stock has gained 857.1% in price year-to-date and 26.3% over the past week to close Friday’s trading session at $390.00.
SoFi Technologies, Inc. (SOFI)
San Francisco-based SOFI is a finance company that operates a platform that functions as a financial services provider and provides student loans, personal loans, auto loans, mortgage loans, and investments to its customers. The company went public in a reverse merger with Social Capital Hedosophia Holdings Corp. V on June 1, 2021.
On September 29, SOFI raised the size of its public offering zero-percent convertible senior notes due 2026 to $1.1 billion. The company intends to use the proceeds for capped call transactions and for general corporate purposes.
SOFI’s adjusted net revenue increased 74.1% year-over-year to $237.22 million in its second fiscal quarter, ended June 30. Its adjusted net revenue from lending rose 47% from the same period last year to $172.23 million. And its adjusted EBITDA came in at $11.24 million, up substantially from its negative year-ago value.
Analysts expect its EPS to improve 77.6% year-over-year in the next year (fiscal 2022), while a $1.46 billion consensus revenue estimate for the next year indicates an increase of 50.1% year-over-year.
SOFI’s stock has gained 28.4% in price over the past month and 20.3% over the past week to close Friday’s trading session at $19.38.
LendingClub Corporation (LC)
LC operates as a bank holding company for LendingClub Bank, providing a range of financial products and services in the United States. In addition, the San Francisco company offers commercial, industrial, commercial real estate, small businesses, and equipment loans.
On September 9, LC expanded LCX, its electronic trading platform, to include LCX Link. This expansion in the company’s capabilities is expected to simplify transactions for institutional platform investors. “The efficiency we’re enabling combined with our scale increases accessibility and enhances transparency for investors, which ultimately drives new and more competitive products for our members,” said Clarke Roberts, VP of Marketplace Services at LendingClub.
For its fiscal second quarter, ended June 30, LC’s total net revenue increased 406.4% year-over-year to $204.38 million. This can be attributed to a 639.8% rise in its non-interest income from the prior-year quarter to $158.48 million. Its consolidated net income and EPS stood at $9.37 million and $0.09, respectively, both up substantially from their negative year-ago values.
The Street’s $0.11 EPS estimate for the current quarter (ending December 2021) reflects a 145.8% improvement from the prior-year quarter. Likewise, the Street’s $235.72 million revenue estimate indicates a 210.5% year-over-year increase. In addition, LC has beaten consensus EPS estimates in each of the trailing four quarters.
The stock has gained 586.8% in price over the past year and 11.5% over the past week to close Friday’s trading session at $34.20.
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UPST shares were trading at $373.37 per share on Monday afternoon, down $16.63 (-4.26%). Year-to-date, UPST has gained 816.25%, versus a 20.62% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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