The fintech industry is a booming one that is growing rapidly. As technology continues to lead to evolution in the finance industry, more opportunity arises for the companies that are on the leading edge of this evolution.
While there is a vast number of stocks to choose from in the space, there are a few that are offering what appear to be the largest opportunities.Ă‚
PayPal is one of the largest companies in the fintech sector, with a market cap of more than $125 billion, and it doesn’t look like the company is going to stop growing any time soon. The allure to PayPal is multifold, catering fintech services to millennials, entrepreneurs and those looking for security in online purchases.
As one of the first in the fintech space, PayPal has a brand that is second to none of its peers, giving it the ability to take a large share of a massive market. In fact, the peer-to-peer payments industry is expected to grow to be worth well over $300 billion annually by 2022. Moreover, the digital payments market is expected to grow to be worth $8 trillion by 2020.
It’s also worth mentioning that PayPal is the owner of Venmo, a peer-to-peer payments app that has taken the market by storm. In fact, the company is one of the two top contenders in the peer-to-peer payments battle, competing with the likes of Zelle.
It is argued that the app is doing so well because it is not only backed by the strength and security that PayPal has to offer, it is designed with the millenial in mind. Millenials are the largest audience in the peer-to-peer payments industry, so Venmo’s hold on that market is great for PayPal and its investors.
Finally, it’s important to keep in mind that while the digital payments market is a massive one, and PayPal is a household name, it actually only takes a small percentage of that market. With the company’s leadership role in peer-to-peer payments and expertise in the digital payments sector, there is strong potential for growth ahead.
With PayPal being on the forefront of the peer-to-peer payments and digital payments markets, and a brand that is recognized by the masses, the company is likely to continue to take a large share of these markets. As a result, we can expect to see strong growth from the stock ahead.
Mogo Finance Technology (MOGO, Financial)
Mogo Finance Technology is a Canadian fintech play that is one of the most compelling opportunities in the fintech Space, for several reasons.
First and foremost, no matter what metric you look at, the company is highly undervalued compared to its peers. For example, looking at market cap, investors have given the company a value of only $75 per member, of which the company has 800,000. Chime, a challenger in the U.S., recently raised money at a $1.5 billion valuation, and N26 raised funds at a $2.7 billion valuation. This puts their value-per-user at $500 and $1,174, respectively. With similar metrics and a market cap of just under $65 million, highly undervalued doesn’t quite explain the situation at Mogo.
Nonetheless, it’s not enough to just say that a company is undervalued. There’s got to be more of a reason to be interested, and when it comes to Mogo, there is. The company is quickly emerging as a leader in the Canadian fintech space – a space with under a half dozen realistic competitors.
Furthermore, analysts have been bullish on the stock. Most recently, noted technology analyst firm Craig-Hallum initiated coverage with a buy rating and a price target of $7 per share. At that price target, the analyst sees potential growth in multiples ahead. Moreover, the analyst suggested that the price per share could climb to $19 by 2021, with a user base growing to more than 1.5 million!
Finally, Mogo is not new to this industry. In fact, the company started more than 15 years ago. It is also considered to be one of the pioneers of bringing multiple digital financial products into its mobile app, helping consumers manage and control their financial lives. In fact, for years, the company has offered products through its mobile app that is just starting to see competitors, like Square (SQ) and some private fintechs like Robinhood and SoFi.
Considering that Mogo has more than 800,000 members, it is the largest in the fintech market in Canada. Nonetheless, the company is very small compared to the opportunity for future growth, considering that some of the large banks in Canada have more than 10 million customers.
The company also recently announced an all stock acquisition last week that effectively will give it an additional 34 million Canadian dollars in cash and monetizable assets for a net increase in its shares following the transaction of only 3.2 million. This, combined with continued growth in demand in the region for digital money management options, little by way of competition, a valuation that seems unrealistically low, and positive analyst coverage, suggests that Mogo Finance Technology could prove to be a great opportunity ahead.
When you think of Alibaba, you likely think of a massive Chinese online marketplace. However, the term fintech may be the furthest thing from your mind. Nonetheless, due to a big move made by Alibaba, it is entering the fintech space with a splash.
In February, the company announced that it would be acquiring 33% of Ant Financial. Ant Financial is a massive player in fintech with a value of around $60 billion. Moreover, the company is expected to make a public debut relatively soon.
This is a big move for Alibaba and its shareholders as it gives the company’s shareholders access to the quickly expanding fintech sector while providing the security that an investment in Alibaba comes with. In fact, Daniel Zhang, CEO at Alibaba recently said:
“This transaction is a significant step for Alibaba to enhance our long-term strategic relationship with Ant Financial as we continue to pursue our mission to make it easy to do business anywhere. Importantly, an equity stake in Ant Financial enables Alibaba and our shareholders to participate in the future growth of the financial technology sector, as well as the benefits of user growth and improved customer experience.”
With this acquisition, Alibaba went from being indirectly involved in the FinTech space to one of the big contenders in no time flat!
Staying on the topic of highly valuable Chinese companies that provide indirect access to the fintech space while providing the strength and security of a blue chip play, there is JD.com.
JD is Alibaba’s biggest competitor in the e-commerce space. As a big player in e-commerce, it has a clear relation to fintech. After all, how else would consumers pay online? So, it wouldn’t be surprising to find out that the company has a large stake in a big Chinese fintech player.
In fact, JD.com owns an 11% stake in the Chinese fintech player Lexin Fintech. While Lexin is a startup for the most part, it has done a good job of getting the attention of investors. In fact, Lexin FinTech (LX) recently uplisted to the Nasdaq with a price of $8 per share. Today, the stock has risen by far more than 50% as investor interest continues to climb.
All in all, like Alibaba, JD.com provides the benefit of indirect involvement in the growth of the fintech sector while investing in stable companies that have a long-term history of providing value to investors.
Finally, Intuit. This was the original fintech player, creating the first widely accepted technology that was used in a financial application. The company is the maker of Quicken and Quickbooks, some of the most widely used tax and accounting software.
Due to its strong name in the industry, consumers and businesses alike choose the company’s software solutions consistently over its competitors. Moreover, the company is expanding its value further.
Intuit recently announced that it would be launching QuickBooks Capital. By late 2017, the newly launched funding platform had already provided well over $100 million in loans. In fact, in the first year of operation, the company funded more than $140 million in loans.
As one of the original players, the company has the strength and stability offered by its household name. Moreover, with QuickBooks capital, the company is showing that it is evolving to tackle corners of the fintech sector that it has not yet been involved in. All in all, I believe that the stock represents strong potential for growth ahead.
Final thoughts
The fintech sector is one that’s ever-evolving, creating several opportunities for investors. The companies listed above provide what may be the strongest long-term growth opportunities in the space. Each of these stocks offers a unique story and product, and each has a way of targeting its audience successfully.
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