In the wake of the pandemic, the fintech sector has faced significant headwinds, causing many investors to lose faith in its potential for rapid transformation. However, with interest rates declining globally, the landscape is shifting, and opportunities are emerging. As technology continues to advance, the share of transactions on fintech platforms is poised to grow, making now an ideal time to capitalize on this trend.
Two fintech stocks, in particular, have been beaten down, presenting a compelling buying opportunity for investors. The first is StoneCo, a Brazil-based company that provides payment processing and financial services to small and medium-sized businesses. Despite its stock plummeting 88% from its peak, the company has demonstrated resilience, with total payment volume increasing 25% year-over-year in the second quarter. With its financial services offerings and efficiency initiatives driving growth, StoneCo’s non-GAAP net income rose 54% year-over-year. Trading at an attractive valuation of 9.5 times expected earnings, this stock offers a promising buy-and-hold opportunity for risk-tolerant investors.
The second stock is Upstart Holdings, a fintech company that uses artificial intelligence to screen loan applicants. After a meteoric rise in 2020, the stock collapsed in the aftermath of the pandemic, but with interest rates falling, its business is poised to rebound. With its partner lenders, Upstart originates consumer loans, and its proprietary algorithm allows it to increase its pool of borrowers and offer competitive rates. As interest rates decline, demand for loans is expected to rise, and Upstart’s expanded business, including home equity lines of credit, positions it for growth. With the stock down over 90% from its peak, the potential upside is significant, making it an attractive opportunity for investors.
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