- Undervalued fintech stocks, which have struggled in recent months could rebound in the coming quarters as consumers continue to embrace the digital financial future.
- Affirm (AFRM): A recently announced partnership with Fiserv (FISV) should increase the company’s customer base.
- PayPal (PYPL): Its new credit card offering could help increase revenues from transaction fees.
- SoFi Technologies (SOFI): The acquisition of the cloud-based banking platform could increase efficiency and cut costs in the future.
Undervalued fintech stocks, our topic for today, have struggled in the first half of 2022. Last year’s excitement over disruptive innovation in an established sector has waned in the face of tightening monetary policy.
Despite recent setbacks, the fintech market is on an undeniable upward trajectory. Recent research highlights, “The market size stood at USD 112.5 Billion in the year 2021. The Global Fintech Market size is expected to reach USD 332.5 Billion by the year 2028, and is expected to grow exhibiting a Compound Annual Growth Rate (CAGR) of 19.8% during the forecast period.”
But for now, interest rate hikes add to mounting inflation levels and fears of an impending recession, all of which have taken their toll on the fintech sector. As a result, the KBW NASDAQ Financial Technology index and the Global X FinTech ETF (NASDAQ:FINX) have fallen over 28.5% and 42.5%, respectively.
Financial technology has changed the way the world manages, spends, and saves its wealth. The challenges this sector has faced over the past few months has done little to change that, and robust fintech shares are likely to rebound in the near future.
With that information, here are 3 undervalued fintech stocks to buy in June:
| AFRM | Affirm | $24.64 |
| PYPL | PayPal | $80.27 |
| SOFI | SoFi Technologies | $7.34 |
Fintech stocks: Affirm (AFRM)
52-week range: $13.64 – $176.65
Founded in 2012, Affirm (NASDAQ:AFRM), offers “buy now, pay later (BNPL)” services to retail clients. It works with over 170,000 merchants and has over 11 million customers. The fintech name also enjoys partnerships with big retailers, such as Amazon (NASDAQ:AMZN), Peloton (NASDAQ:PTON), Shopify (NYSE:SHOP), and Walmart (NYSE:WMT).
In mid-May, Affirm released third-quarter FY22 financials. Total revenue was $354.8 million, a 54% increase year-over-year (YOY). Net loss was $54.7 million, compared to $287.1 million the year before. Diluted loss per share was 19 cents, compared to a loss of $1.23 the previous year. Cash and equivalents totaled $2.27 billion.
Recently, management announced a new partnership with Fiserv (NASDAQ:FISV) to become the first BNPL to be fully integrated with the Carat operating system, which offers “omnichannel commerce solutions.” Fiserv’s merchants will be able to add Affirm’s Adaptive Checkout option, increasing potential revenues and expanding Affirm’s customer base.
Despite operational growth, AFRM stock has lost three-quarters of its value so far in 2022. Shares are trading at 5.42 times trailing sales. Meanwhile, the 12-month median forecast stands at $35.50.
PayPal (PYPL)
52-week range: $71.83 – $310.16
PayPal (NASDAQ:PYPL) offers online payment processing services. It boasts some 325 million accounts, and is available in 202 countries and in 25 different currencies. PayPal also owns Venmo, the popular peer-to-peer (P2P) mobile payment app.
In late April, the company reported Q1 metrics. Net revenue was $6.5 billion, representing an 8% YOY increase. Net income fell to $1.03 billion from $1.45 billion the year before.
As a result, diluted earnings per share (EPS) came in at 88 cents vs. $1.22 a year ago. Free cash flow (FCF) was $1.1 billion.
Recently, PayPal introduced the new PayPal Cashback credit card, issued by Synchrony (NYSE:SYF). The card will offer 3% cash back on all purchases made through PayPal at checkout, and 2% cash back on all other purchases.
Along with many other darlings of the pandemic months, PYPL stock is down around 57% for the year-to-date (YTD). Forward price-to-earnings (P/E) and price-to-sales (P/S) numbers are 19.88x and 3.53x, respectively. At present, the 12-month median forecast stands at $116.50.
Fintech stocks: SoFi Technologies (SOFI)
52-week range: $4.82 – $24.95
SoFi Technologies (NASDAQ:SOFI) offers personal finance services online. From loans to mortgages, credit cards, investing, and banking, SoFi serves 3.5 million members. It currently services more than $50 billion in loans.
In early May, SoFi reported Q1 earnings. Total net revenue was $330 million, increasing from $196 million the year before. Diluted loss per share was 14 cents, compared to a diluted loss per share of $1.61 the previous year. Cash and equivalents totaled $1.32 billion.
Management has recently completed the acquisition of Technisys, a digital, cloud-based banking platform. The platform will be integrated into SoFi Galileo, its payment processing platform. Analysts expect the transaction to improve the company’s vertically integrated banking technology.
SOFI stock is down over 53% YTD. Shares are trading at 5.92 times trailing sales. Finally, the 12-month median forecast stands at $9.50.
On the date of publication, Tezcan Gecgil 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.