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4 Stocks to Profit From the Fintech Revolution

Zacks

Ever since its inception, the banking industry has more or less had a stranglehold on our financial transactions. And till only recently, their familiar brick-and-mortar format was the only option available for nearly all consumers. Now, with the rise of fintech, such scenes will soon become part of the financial history books.

Once a nascent industry, fintech has reached an inflection point. It is now poised to increasingly determine how we transfer, save and invest our money. Modest startups and early disruptors are now growing into industry leaders. As they build up their brands and widen their market share, it would be prudent to invest in fintech stocks to cash in on a phenomenon ready to explode.

From Disruptors to Industry Leaders

According to Itay Goldstein, a professor of finance at Wharton, fintech consists of a bunch of emerging technologies that will “completely reshape the finance industry.” Essentially, the term refers to technological innovations in financial services.


These could be used to both support and disrupt traditional banking and financial services. The term encompasses everything from the blockchain phenomenon to cryptocurrency and robo-advisors for investors.

But after posing as a minor worry to major financial players, fintech companies are now set to replace them altogether. Most early disruptors are now building additional functionality around their core offering and expanding their range of services. And their potential is beginning to increasingly reflect these opportunities.

Robinhood, which enables commission free equity and ETF trading, saw its valuation skyrocket to $5 billion last year. This was primarily due to the opportunity that it presents rather than its current financial metrics.

Brand Identity vs. Functionality

Ultimately, the fintech disruptors of the past will slowly morph into the next generation of banks. Existing players will fight back, but the opportunity their existing business represents is too lucrative to resist. This will convince venture capital to keep fintech companies well-funded. This trend would also likely extend to late-stage entrants with huge growth potential.

A higher level of personalization holds the key to fintech’s future. In fact, users could utilize fintech products to differentiate themselves, as much as say their choice of music or car would. This means brand identity would become as important for fintech products as everyday functionality.

For instance, SoFi, known primarily for its student loan offering, assigns most of its marketing spend toward member experiences. This includes career counseling and happy hours. Ellevest is targeted at women looking to invest and offers a set of tools specifically designed for this purpose. And the list goes on with newer entrants targeting veterans, Baby Boomers and other such categories.

Our Choices

With budding startups and disruptors poised to become industry leaders, fintech seems to be the next frontier. Initially geared toward a specific purpose, fintech companies are widening both the scope and scale of their services. This is intended to challenge and even replace sector incumbents.

This is why it’s a great time to invest in fintech, especially in those stocks that make up KBW & NASDAQ’s Fintech Index (KFTX). The index is a performance benchmark for publicly traded fintech companies. We have narrowed our search to the following stocks based on a good Zacks Rank and other relevant metrics.

Fidelity National Information Services Inc. FIS is a leading provider of banking and payments technology solutions, processing services and information-based services to the financial services industry.

Fidelity National’s expected earnings growth for the current year is 42.3%. The Zacks Consensus Estimate for current-year earnings has improved 29.5% over the past 30 days. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Square, Inc. SQ offers financial and marketing services. The company provides payment and point-of-sale services, which include hardware and software to accept payments, streamline operations and analyze business information.

Square has a Zacks Rank #2 (Buy). The company’s expected earnings growth for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has moved 69.9% north over the past 30 days.

Euronet Worldwide, Inc. EEFT is a leading electronic payments provider. The company offers payment and transaction processing and distribution solutions to financial institutions, retailers, consumers and service providers.

Euronet has a Zacks Rank #2. The company has expected earnings growth of 24.4% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 0.1% over the past 30 days.

Worldpay, Inc. WP is a provider of electronic payment processing services through its subsidiary Vantiv Holding, LLC.

Worldpay has a Zacks Rank #2. The company has expected earnings growth of 24.4% for the current year. The Zacks Consensus Estimate for current-year earnings has moved 3.1% north over the past 30 days.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?

From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.

This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.

See Stocks Today >>


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