The financial technology industry has been buoyed by the recent economic downturn in the last two years.
Despite economic growth slowing, some fintech firms may continue to prosper near-term. According to Wells Fargo research.
Fintech''s fundamentals were steady in the first quarter of 2022, according to a commentary. Group revenue increased by 26.5%, while earnings per share (EPS) increased by 4.8 percent.
The analysts said that, next year, the sector''s revenue growth will continue to slow over the next two quarters. We believe that fintech management teams will begin focusing more on expenses and their bottom lines as the macro environment recedes.
Wex (WEX) - Get WEX Inc. Reportand Fleetcor Technologies (FLT) - Get FLEETCOR Technologies, Inc. Reporttop the analyst rankings for the near term.
They cite several positive factors:
1. We prefer that the fuel exposure is greater than we expected from WEX, but 40% for FLT. Fuel prices have remained elevated, and the demand environment remains stable.
2. Both businesses are profitable. We believe both companies have the potential to gain EPS advantage versus the consensus in the second and third quarter.
Both businesses have excellent track records and strong management teams.
2. Both companies are traded much closer to their trough multiples [than their peaks], which suggests that both companies'' shares are oversold.
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Fidelity National Information Services (FIS) - Get Fidelity National Information Services, Inc. Report, Fiserv (FISV) - Get Fiserv, Inc. Reportand Global Payments (GPN) - Get Global Payments Inc. Report.
The analysis of analysts
1. In our coverage, we see a more favorable risk/reward for all three businesses than in other (higher-multiple) fintech names.
2. We believe all three will continue to produce positive results in the next couple quarters. Especially because of a permanent travel recovery.
3. All three have good balance sheets and merger & acquisition capabilities. Certain sections of their businesses are extremely durable and defensive. (i.e. FIS in banking).
4. All three have managerial teams [with] strong operators who have demonstrated a solid ability to adapt in several economic situations.
5. Compared to WEX and FLT, all three companies are currently trading significantly closer to their [forward] P-E multiples... than their peak.
PayPal, Shopify Woes
Shopify, Inc. Class A Reportand diversified financial service company PayPal (PYPL) Report: Get PayPal Holdings, Inc. Report.
Given the broader drop in e-commerce and discretionary spending, SHOP''s low/no margin narrative is a bit problematic for investors in the near future, according to experts.
PYPL is still in the midst of a few company-specific near-term obstacles (management transition, lowering guidance and execution in 2022).