Many fintech stocks extended their recent slump on Monday, but there could be opportunities in this beleaguered segment of the market, analysts said.
Although the S&P 500 SPX,
turned on Monday to end in positive territory after a tumultuous session, fintech names largely held in negative territory amid lingering concerns over rate hikes and inflationary pressures, even as these assets saw their losses pared on a frenetic Monday on Wall Street.
The Global X FinTech FINX ETF,
one of the most popular exchange funds that offers exposure to fintech companies, for example, ended the session with a loss despite a broader market reversal that saw steep early declines for the S&P index 500 SPX,
the Nasdaq Composite COMP,
and the Dow Jones Industrial Average DJIA,
turn into unlikely gains on the day.
The Global X FinTech ended Monday down 0.8%, even as the S&P 500 financial sector SP500.40,
closed up 0.2%, for example. Over the past 30-day period, the ETF is down 23.2% and 18.1% since the start of the year.
Analysts, however, see the opportunity for potential investors to exercise judgment as they scour the sale for fintech opportunities that may prove to be winning investments in the long run.
Monday’s declines in fintech came as bitcoin BTCUSD,
and Ether ETHUSD,
running on the Ethereum blockchain, also saw a dramatic turnaround on Monday. However, these assets were mainly rocked by concerns about an overly strict regulatory environment for the nascent digital asset industry.
Fintech has been swept away by the fall in crypto in part because many of these companies have exposure to digital assets such as bitcoin. Coinbase Global Inc. COIN,
operates an exchange for crypto trading, while PayPal Holdings Inc. PYPL,
and Square parent Block Inc. SQ,
allow users to buy and sell virtual assets on their platforms or are otherwise exposed to the blockchain technology that underpins digital currencies.
However, analysts say investors should weigh the fine distinctions between these fintech companies, as those with more options for generating revenue may perform better over the longer term.
“When it comes to crypto, we make a distinction between companies that are 100% crypto-dependent,” such as Coinbase, “and those that benefit from crypto engagement,” such as Block and PayPal, said Mizuho analyst Dan Dolev told MarketWatch. “We are more worried about the former as they have no other levers to pull if the crypto falls out of favor.”
A company like Coinbase “is rightly punished,” said Ryan Coyne, an analyst at Mizuho. But he thinks it’s important that investors can recognize the differences between Coinbase and other fintech names like Block and Affirm Holdings Inc. AFRM,
which he sees as simply “bundled with the broader sale”.
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Coinbase shares lost 0.3% in Monday afternoon trading, after falling 15.3% earlier in the session. They are down 29% over the past month.
Bulk stocks, meanwhile, also pared losses on Monday to end down 0.7% after falling 13.6% earlier. Shares ended lower for the eighth straight session and are down 30% in the past month.
Affirm, which offers short-term consumer loans, saw its shares recover to end Monday up 1.1%, although they were still down 42% month on month. Marqueta Inc. shares MQ,
ended down 3.1% on Monday after falling 16.1% earlier in the day. Shares of the card issuer posted an eighth consecutive decline.
“As far as Marqeta and Affirm are concerned, they are simply being unjustly punished by the market,” Dolev said. “They should shine again as investors realize that the fundamentals are going to be very strong over the next few quarters.”
Other losers in the fintech sector on Monday included financial services firm SoFi Technologies Inc. SOFI,
which fell 4.3% on Monday, and financial services company Upstart Holdings Inc. UPST,
which was down 1.5%.
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Shares of Visa Inc. V,
and Mastercard Inc. MA,
each was down about 2% on Monday, but MoffettNathanson analyst Lisa Ellis sees potential in both.
“I view the sell-off (which is primarily focused on interest rates and inflation) as a fantastic opportunity to enter some long-term secular winners in payouts at attractive valuations, particularly for higher-priced holders. long term,” she told MarketWatch.
Visa is its top choice, as it expects the company to benefit from factors such as a recovery in travel and a stronger position in Europe. She also likes Mastercard, Block and financial services entity Fiserv Inc. FISV,
And Ellis is more optimistic about Coinbase’s outlook, calling it a “one-of-a-kind expression of the age-old trend in cryptocurrency,” offering an “increasingly attractive valuation” for investors willing to bear. uncertainty.