Wall Street is keeping an eye on issues like high inflation, high interest rates, and softening consumer demand. And at the same time, the sell-side community is focusing on the future, when it comes to deciding what are the top-rated fintech stocks.
During the stock market downturn of 2022, some financial technology stocks experienced heavy volatility. Yet, typically older and more established firms in the space demonstrated resilience.
However, so far in 2023, fintechs have largely begun a recovery again. The market is looking beyond present headwinds and paying more attention to future opportunities and tailwinds. With a fintech comeback in its early stages, now may be the time to begin diving back into this space.
Investors who decide to increase their exposure to the “future of finance” have plenty of options. According to sell-side analyst data compiled by Marketbeat, each of these seven top-rated fintech stocks earns a buy rating on average.
Fiserv (NYSE:FI) isn’t a household name, but it is a big player in the financial technology space. The company provides a variety of payment processing solutions through its platforms of Carat (for omnichannel commerce) and Clover (a point-of-sale platform).
Also, Fiserv provides financial institutions with the back-end technology necessary to facilitate digital financial transactions. Currently, 14 out of 20 analysts covering FI stock rate it a buy. No wonder Wall Street is bullish on this name.
Benefiting greatly from the “digitalization of payments” trend, Fiserv is poised to experience steady growth in the coming years. Earnings are expected to increase by 14.6% in 2024, and by 15.1% in 2025. Weighing these forecasts against FI’s current forward earnings multiple of 17.1, and besides being an attractive fintech option, it may be a standout among “growth at a reasonable price” stocks.
Shift4 Payments (FOUR)
Shift4 Payments (NYSE:FOUR) is another of the payments-focused, top-rated fintech stocks earning high marks from analysts currently. Out of 17 active analyst ratings, 16 rate FOUR shares a buy or the equivalent to buy.
During the 2021 post-pandemic bull market, FOUR stock was a high-flier among fintechs. That was mainly due to its exposure to e-Commerce and hospitality industries benefiting the most from the lockdowns. However, shares were hit especially hard when economic challenges began to emerge later that year.
Flash forward to now, though, and Shift4 Payments is flying high again. The stock price spiked earlier this month, after releasing a “beat and raise” quarterly earnings report. It still sports a reasonable valuation of 22.4 times forward earnings, despite bouncing back by 50% over the past twelve months. Investors may want to follow the sell-side’s lead with FOUR.
Despite being founded 60 years ago, Mastercard (NYSE:MA) is just as much of a fintech as newer, earlier-stage companies.
In fact, for growth and stability, MA stock is a smart choice. While a tad pricey at 33.6 times forward earnings, the company’s deep economic moat help to justify this valuation. Plus, forecasts calli for earnings growth in the high-teens in 2024 and 2025,
True, Mastercard may have a forward yield of just 0.56%. So when it comes to dividends and dividend growth, payouts have increased twelve years in a row. They average 17.92% annually over a five year average. Thus, it’s easy to see the reason 18 out of 20 analysts give MA shares a buy rating.
As Investor’s Business Daily recently pointed out, MercadoLibre (NASDAQ:MELI) may be best known as Latin America’s answer to Amazon (NASDAQ:AMZN). But it’s as much “a fintech powerhouse” as it is an e-commerce giant in Central and South America.
The company owns several fintech-related businesses that complement its flagship MercadoLibre e-commerce marketplace segment. These include financial technology solutions provider Mercado Pago, asset management firm Mercado Fondo, and consumer/business. Due to the company’s success in both the e-commerce and fintech sectors, and the prospect of continued high growth, sell-siders stand bullish on MELI stock.
Out of 11 analysts covering MELI, 10 rate the stock as a buy or the equivalent to buy. While sporting a rich valuation of 70 times forward earnings, confident investors consider it a top fintech stock to buy.
Twenty of 34 analysts with active ratings on PayPal (NASDAQ:PYPL) give the fintech giant a buy or equivalent to buy rating. So, “cautiously optimistic” may be a better way to describe current sell-side sentiment.
Recently, writer Louis Navellier and the InvestorPlace Research Staff weighed in on PYPL. They pointed out that several analysts, like Morgan Stanley’s James Faucette and Mizhuo’s Dan Dolev, have walked back some of their bullishness for PYPL stock. Further, PayPal is pursuing efforts that have a strong chance of paying off, such as cost-cutting, along with share repurchases totaling $5 billion.
Still, great uncertainty lies with PayPal’s efforts to get growth back on track. And with the stock trading for only 11.75 times 2023 earnings forecasts, this precariousness may be more than baked-into PYPL’s valuation. So, opportunity at current prices may exist but consider it best to tread carefully.
Block Inc. (SQ)
Based on active sell-side ratings, Block Inc.(NYSE:SQ) is one of the top-rated fintech stocks. Twenty-two out of 30 analysts give shares in the Square and CashApp parent a buy or equivalent to buy rating. Additionally, recent results suggest a comeback could continue for this high-profile fintech play.
For the September quarter, the company reported solid growth in areas like gross profit up 21% year over year (YOY) and adjusted EBITDA, up by near 45.9%. Also, revenue and earnings came in ahead of expectations. Add in a raising of guidance, and it’s clear the release resulted in a post-earnings rally for SQ stock.
Trading for almost 33.2 times forward earnings, it’s a stretch to call Block Inc. “cheap”. But if last quarter’s results mark the start of a trend, subsequent growth could be enough to propel SQ stock (trading for around $64 per share) back to higher prices.
Much like its longtime rival Mastercard, Visa (NYSE:V) is another blue-chip fintech lauded by the sell-side community. Out of 18 active analyst ratings on Visa shares, 14 of them rate the stock a buy or equivalent to buy.
Specifically, V stock has many of the same quality and growth attributes that make MA stock a top-shelf choice. Also, one factor that the stock appears more attractive than its peer may be that shares trade for 25.6 times earnings. That’s a big discount relative to MA’s low-30s forward multiple.
Additionally, both MA and V have long growth runways. Why? As Barron’s recently discussed, the world is isn’t done making the switch from cash to digital payments. As this trend keeps playing out, both companies stand to experience continued double-digit earnings growth.
On the date of publication, Thomas Niel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.