Investors are always looking for undervalued stocks that have the potential to generate strong returns. Undervalued fintech stocks represent attractive investment opportunities, and the timing could not be better.
Due to high inflation rates and interest rate hikes, investors looking to purchase undervalued fintech stocks are in for a treat. There are several high-profile names available at a steep discount.
Investors should consider adding these undervalued fintech stocks to their portfolios. These stocks have the potential to generate strong returns as the fintech sector continues to grow.
As you look to open your wallet and make purchases for the holidays, now is the perfect time to add undervalued fintech stocks to the items you want to buy.
| SHOP | Shopify | $38.97 |
| UPST | Upstart Holdings | $17.13 |
| LMND | Lemonade | $17.88 |
| V | Visa | $209.08 |
| PYPL | PayPal | $72.23 |
| FOUR | Shift4 Payments | $44.73 |
| MQ | Marqeta | $6.22 |
Shopify (SHOP)
Shopify (NYSE:SHOP) is one of the biggest players in the e-commerce industry by market capitalization. It is 10% of all gross merchandise volume and 25% of the U.S. market. That puts it up there with Amazon (NASDAQ:AMZN).
In recent months, the stock took a pounding because of broader macroeconomic conditions, but there are signs the worst is over.
Adobe Analytics says Black Friday and Cyber Monday holidays were a big boon for U.S. retailers as online sales were up 2.3% from the previous holiday season to $9.12 billion. Shopify also smashed records and reported sales of $3.36 billion over the one-day holiday.
The company noted that its most popular categories were apparel, wellness, beauty and home goods. Spotify’s president, Harley Finkelstein, boasted at the company setting unprecedented record-breaking sales.
Meanwhile, in Q3, revenue jumped 22% to $1.4 billion, which includes two percentage points of the U.S. dollar gaining strength. Subscription Solutions and Merchant Solutions revenue rose 12% from the year-ago period and 26%, respectively.
The monthly recurring revenue was $107.0 million, 8% up because of Shopify Plus’ contribution of $35.1 million. On both the top and bottom lines, Shopify comfortably beat analyst estimates.
Shopify Fulfillment Network is a game-changer for the company as it saw an 80% increase in merchants utilizing at least one logistics service. Deliverr cross-docks saw a 450% year-on-year increase in orders fulfilled, while Shopify had a 75% jump in the number of merchants with inventory in the cross-docks.
Given Shopify’s strong performance, reasonable valuation, and excellent sales growth prospects, the stock is one of the best undervalued fintech stocks to buy.
Upstart Holdings (UPST)
Upstart Holdings (NASDAQ:UPST) uses AI models, benefitting from non-traditional metrics such as employment and education to assess creditworthiness. Technology-based lending gives the company more accurate results and an edge over the competition using traditional methods.
The company plans to use its technology to expand into other lending areas, such as small business loans and student loans. Upstart Holdings is changing how we think about lending, and its innovative approach will revolutionize the industry.
Upstart uses artificial intelligence to analyze data and develop more efficient models for handling defaults and loan fraud. In theory, this should result in fewer bad debts. However, the results may be worse than expected with rising inflation and a hawkish Fed.
The effectiveness of these AI models during an economic downturn is yet to be seen and gauged. This doesn’t mean AI will not offer reliable results for lenders; we don’t know yet. It is one of the factors potentially holding the company’s growth in recent times. While the long-term potential for AI in the financial sector is huge, the jury is still out on how well it will perform in a downturn.
The company’s shares have fallen recently due to concerns about its long-term growth prospects. However, Upstart has a future-oriented business model, well-positioned to benefit from the continued growth of the fintech sector. as a result, the stock is undervalued at its current price.
Lemonade (LMND)
Lemonade (NYSE:LMND) is using technology to make it easier for people to get insurance. Lemonade is also making it easier for people to file claims and get payouts. The company is using artificial intelligence to make all of this possible. Considering all this, Lemonade is a company that is worth watching. It could completely change the insurance industry.
However, Lemonade is not immune to the issues afflicting the broader economy. Much like other tech stocks, LMND is in hot water. Year to date, the stock is down by half, making it attractive for value-oriented investors.
In the third quarter, Lemonade reported an earnings miss. Nevertheless, its revenues surged by 107.3% year over year to $74 million, outperforming analyst estimates of $64.7 million.
The revenue was also ahead of the outlook provided by the company at $63-$65 million. Moreover, due to strong revenue generation, Lemonade guided its full-year revenue to $245-$248 million, which is quite ahead of its $239 million forecasts.
Despite the net income losses, Lemonade’s fundamentals remain strong. With its AI-powered solutions, Lemonade Inc. is set to disrupt the trillion-dollar insurance industry. Moreover, the company’s stock price battering provides significant entry points for investors. This makes it one of the top undervalued fintech stocks to buy.
Visa (V)
Whatever the economy might throw up, Visa (NYSE:V) remains one of the best companies in the world for any stock portfolio.
Its dominant position in the market makes it one of the best for any portfolio. While the rest of the fintech space is not doing very well, Visa is one of the few companies that is still doing quite well. It is down slightly this year but has not yet suffered a meltdown like some others.
The company’s fundamentals are still strong and continue to grow at a healthy clip. For these reasons, Visa remains one of the best companies to own for any investor.
Visa’s U.S. payment volume saw a 9% increase year over year per the company’s volume and transaction data for October and November (1st-21st); the debit rose 8% and credit by 10%. There was a 9% growth year over year in card not present volume and 8% in card present volume.
In the fiscal fourth quarter, Visa reported revenue of $7.8 billion, up 18.7% year over year, while the diluted earnings per share were up by 19.1% year over year at $1.93. The total cross-border volume jumped 36% year over year. The company announced a 20% increase in quarterly cash dividend to $0.45 per share. Furthermore, a share repurchase program of $12 billion was authorized by the fintech giant.
PayPal (PYPL)
According to the PYMTS Black Friday survey, PayPal (NASDAQ:PYPL) and its unit Venmo took a share of 34.9% of the shopping during the Black Friday shopping event.
In the third quarter, the revenue of Paypal was $6.85 billion, which rose 11% year over year, and the earnings per share were up from $0.93 in the third quarter of 2021 at $1.15.
Net new active accounts were 2.9 million, up from 0.4 million reported in the same quarter last year. The net income rose 22% from the year-ago period and reached $1.33 billion, while the profit margin was 19%.
The company’s guidance for the fourth quarter for net revenue is between $7.38 billion to $7.74 billion. Meanwhile, the adjusted EPS is projected to be between $1.18-$1.20, very healthy numbers considering the broader economy.
Shift4 Payments (FOUR)
Shift4 Payments (NYSE:FOUR) is a payment processor founded in 1999 by the then-16-year-old Jared Isaacman.
Although it does not get as much press as some of the other major companies in the fintech space, it is still a prominent player that should not be ignored when looking for undervalued fintech stocks to buy.
The company offers many features that make it an attractive option for businesses, including support for multiple currencies, fraud prevention tools, and advanced reporting. In addition, Shift4 has a strong track record of innovation, with several patents to its name.
As the fintech sector grows, Shift4 will likely become an increasingly important player. As such, it is worth considering for anyone looking for undervalued stocks in the space.
On Nov. 15, Shift4 Payments inked a deal to process payments and provide commerce-enabling hardware for 23 casinos and other venues owned and operated by the Chickasaw Nation. The count includes the world’s largest casino, WinStar World Casino and Resort.
The fintech innovator reported non-GAAP earnings per share of $0.44, up from $0.26 reported in the same period last year and from analysts’ estimates of $0.43 per share. The revenue of $547.3 million was up 45% year over year but missed analyst estimates by a slight margin.
The adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), and free cash flow for the quarter were $85.4 million and $95.3 million, respectively, up from $55.8 million and $36.7 million in the year-ago period.
Marqeta (MQ)
Marqeta (NASDAQ:MQ) is a cutting-edge, cloud-based processing platform quickly gaining popularity among developers and businesses. Marqeta’s appeal lies in its simple yet powerful API that allows developers to process transactions easily without needing a merchant account.
Marqeta supports all major credit and debit cards and popular alternative payment methods such as Apple Pay and Google Wallet. In addition, Marqeta’s fraud protection tools are among the best in the industry, making it an ideal choice for businesses looking to reduce risk.
Marqeta reported a GAAP net loss of $53 million in the third quarter. However, the company’s revenue was up 45.7% from the year-ago period, beating the Wall Street estimates by $10.72 million. The company reported an increase of 54% in total processing volumes, which is substantially good news as the company’s total processing volumes have been increasing significantly since the beginning of the year, despite the macroeconomic headwinds.
Marqeta is a strong up-and-coming business, and with its new expansions and partnerships, the company shows strength for the future. Moreover, with a price-to-sales ratio of 5, the company’s valuation looks quite attractive.
On the publication date, Faizan Farooque 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.