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The fintech industry has experienced explosive growth over the past few years, led by industry giants Visa and Mastercard. But SoFi Technologies has not caught up and is struggling. This article provides an insight into the prospects of these fintech companies. Continue reading….
Financial technology, or fintech, refers to using technology to enhance or automate financial services. Fintech has grown rapidly since the pandemic as it has made our lives easier by making financial services more accessible, efficient and affordable.
Conventional financial company Visa Co., Ltd. (Ⅴ) and Mastercard Incorporated (MA) is currently leading the way with exciting innovations in fintech. However, not all financial firms have been able to benefit from industry growth. SoFi Technologies, Inc.SOFIMore) can’t keep up and is struggling to survive. So while investing in V and MA may be wise, I am very bearish on SOFI.
Before we dive deeper into stock fundamentals, let’s talk about what’s happening in the fintech space.
Fintech companies offer a wide range of services including mobile payments, online lending, digital banking, digital wallets and wealth management. Traditional financial firms are lagging behind innovative fintech firms as they offer faster and more affordable digital financial services.
With the spread of smartphones and the Internet, the number of people using digital financial services is rapidly increasing. Fintech companies are using cutting-edge technologies such as artificial intelligence (AI), blockchain, and machine learning to improve their services.
The global fintech market is expected to grow rapidly Reach $556.58 billion by 2030, at a CAGR of 19.5%Investor interest in fintech stocks is fueled by the ARK Fintech Innovation ETF (arkf) 19.8% are profitable year-to-date.
Let’s discuss the fundamentals of a featured stock.
Visa Co., Ltd. (Ⅴ)
V is a global payments technology company that enables digital payments between customers, merchants, financial institutions, businesses, strategic partners and government agencies. It also manages VisaNet, a transaction processing network that enables the authorization, clearing and settlement of payment transactions.
On December 14, 2022, V pledged to invest $1 billion in Africa over the next five years to drive resilient, innovative and inclusive economies across the continent. V’s entry into Africa will help it take advantage of the rise in digital payments.
V’s 50.95% 12-month net profit margin is 96.8% higher than the industry average of 25.89%. Similarly, his EBIT margin after 12 months of 67.06% is 203.1% above the industry average of 22.12%. Additionally, the stock’s trailing 12-month leveraged FCF margin of 50.66% is 201.7% higher than the industry average of 16.79%.
For the second quarter ended March 31, 2023, V’s net revenue increased 11.1% year-over-year to $7.99 billion. Non-GAAP net income was $4.38 billion, up 14.3% from the prior year. Non-GAAP EPS was $2.09, up 16.8% year-over-year.
Analysts expect V’s EPS and earnings to grow 6.6% and 10.7% year-over-year to $2.11 and $8.06 billion in the quarter ending June 30, 2023, respectively. Exceeded Street EPS estimates in each of the subsequent four quarters. Over the past six months, the stock has gained 13% and closed its last trading session at $226.98.
V’s POWR rating It reflects its solid outlook. The stock has an overall rating of B, which is equivalent to a buy in our proprietary rating system. POWR Ratings evaluate stocks by 118 different factors, each with its own weighting.
Within consumer financial services 1 out of 48 brands. There is an A grade for quality and a B grade for stability and sentiment. click here View other ratings for Growth, Value, and Momentum.
Mastercard Co., Ltd. (MA)
MA is a technology company that provides transaction processing and other payment-related products and services. Facilitate the processing of payment transactions, such as authorization, clearing and settlement, and provide other payment-related products and services. The company offers integrated products and value-added services for account holders, merchants, financial institutions and businesses.
On April 5, 2023, MA announced that it is accelerating its efforts to remove first-use PVC plastic from payment cards on its network by 2028. The move reinforces the company’s sustainability efforts.
MA’s 42.33% 12-month net profit margin is 63.5% higher than the industry average of 25.89%. Similarly, his EBITDA margin after 12 months of 60.20% is 181.5% above the industry average of 21.38%. Additionally, the stock’s 0.60x 12-month asset turnover ratio is 199% higher than the industry average of 0.20x.
In the first quarter ended March 31, 2023, MA’s net revenues increased 11.2% year-over-year to $5.75 billion. Net cash from operations increased 7.7% year-over-year to $1.92 billion. The company’s adjusted operating margin was 58.2%, compared with an adjusted operating margin of 57.5% in the year-ago quarter.
Non-GAAP net income decreased slightly from the prior year to $2.68 billion. Non-GAAP EPS was $2.80, up 1.4% year-over-year.
For the quarter ending June 30, 2023, MA’s EPS and earnings are expected to increase 17.1% and 12.5% year-over-year to $3 and $6.18 billion, respectively. Exceeded consensus EPS forecasts in each of the following four quarters. Over the past six months, the stock has gained 17.6% and closed its last trading session at $376.03.
MA’s POWR Rating reflects this positive outlook. MA’s overall rating is B, which is equivalent to a purchase in our own rating system.
Stability, Sentiment and Quality are B grades. Within the same industry, MA ranks second. To see other ratings for MA Growth, Value, and Momentum, click here.
SoFi Technologies, Inc.SOFIMore)
SOFI offers a variety of financial services. He operates in three segments: Lending, Technology Platforms, and Financial Services. The company provides loans, financial services and products that enable members to borrow, save, spend, invest and protect money. We also provide personal loans, student loans, home loans, and related services.
SOFI’s net profit margin for the past 12 months was negative 14.68%, compared to the industry average of 25.89%. Similarly, our return on common equity over the last 12 months was negative 5.46% compared to the industry average of 11.06%. Moreover, the 12-month asset turnover ratio of 0.10x the stock price is 52.1% lower than the industry average of 0.20x.
SOFI’s total noninterest expense increased 15.5% year-over-year to $508.22 million in the first quarter ended March 31, 2023. Net loss narrowed 68.8% year-over-year to $34.42 million. Loss per share also narrowed 64.3% year-over-year to $0.05. Additionally, total non-interest income from the lending segment decreased 14.2% from the prior year period to $136.03 million.
Analysts expect SOFI’s EPS to remain negative for the quarter ending June 30, 2023. Over the past three months, the stock has fallen 36.5% and closed its last trading session at $4.91.
SOFI’s POWR Rating reflects this challenging outlook. The stock has an overall D rating, equivalent to Sell in our proprietary rating system.
Ranked 86th out of 100 brands. Financial Services (Enterprise) industry. There is an F grade for stability and a D grade for value and quality. click here To see SOFI’s other assessments of growth, momentum and sentiment.
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V shares fell $226.98 (-100.00%) in pre-market trading on Wednesday. Year-to-date, V is up 9.46%, while the benchmark S&P 500 index is up 7.99% over the same period.
About the author: Dipanjan Benture
Dipanjan has been interested in the stock market since elementary school. This earned him a master’s degree in Finance and Accounting. Today, Dipanjan works as an investment analyst and financial journalist with a keen interest in reading and analyzing emerging trends in financial markets.
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