Best Fintech Stocks to Invest in 2024

 

Best Fintech Stocks

Fintech, also known as financial technology, is the growing field of companies that use technology to automate and simplify financial services for businesses and customers. It’s a huge field that includes everything from artificial intelligence (AI) to apps, algorithms to software. Some of these companies are the hottest stocks out there.

According to a report by Boston Consulting Group and QED Investors, fintech sector revenues are expected to grow from $245 billion to $1.5 trillion by 2030, making up a quarter of all banking valuations by that time. Here’s a quick look at the best fintech stocks to invest in.

Best Fintech Stocks to Buy in 2024

  1. Marathon Digital: The U.S.-based digital asset technology company mines cryptocurrencies and is a leader in supporting and securing the Bitcoin ecosystem. The company turned a corner toward profitability in 2023 and shares of Marathon (NASDAQ: MARA) rose more than 574% over the past year. 
  2. StoneCo: The Brazilian company has a cloud-based technology platform that supports electronic payments and point-of-sale automation for businesses. Shares of StoneCo. (NASDAQ: STNE) are up more than 108% over the past year.
  3. MercadoLibre: The largest e-commerce and payments ecosystem in Latin America grew its digital payment platform by triple digits in the third quarter, year over year. Shares of MercadoLibre (NASDAQ: MELI) are up more than 85% over the past year. 
  4. Block: The U.S.-based company specializes in mobile payments, financial services and software and hardware for point-of-sale systems. The company, founded by Twitter co-founder Jack Dorsey, is formerly known as Square. Shares of Block (NYSE: SQ) are up more than 11% over the past year.
  5. Affirm Holdings: The U.S.-based consumer financing company, founded by PayPal co-founder Max Levhin, is a leader in the buy-now, pay-later market. Shares of Affirm (NASDAQ: AFRM) are up more than 410% over the past year. 
  6. DraftKings: The U.S.-based online gaming and sports betting company has a great growth profile, thanks to the increase of states opening up to online gambling. Shares of DraftKings (NASDAQ: DKNG) are up more than 200% over the past year.
  7. PayPal: The U.S.-based company, one of the pioneers of fintech, is undergoing a reorganization under new management. Shares of PayPal (NASDAQ: PYPL) are down more than 17% over the past year.
  8. Global Payments: The U.S.-based payments technology company provides software and services in 170 countries. Shares of Global Payments (NYSE: GPN) are up more than 26% over the past year.
  9. Toast: The U.S.-based company has a cloud-based restaurant management system, giving eateries everything they need to organize their businesses. Shares of Toast (NYSE: TOST) are up a little more than 2% over the past year. 
  10. One97 Communications: The company offers digital payment and financial services to consumers and merchants in India. The company owns and operates the payment app Paytm. Shares of One97 (NSE: PAYTM) are up more than 21% over the past year. 

A Closer Look at the Top Fintech Stocks to Invest in

Examining in more detail the top fintech stocks that investors should be looking at this year:

1. Marathon Digital: Best Fintech Stock to Buy in 2024 

The cryptocurrency mining company benefited from Bitcoin’s resurgence in 2023 and in the third quarter, turned a profit for the first time. Marathon reported third-quarter revenue of $97.8 million, up 671%, year over year, led by a 457% increase in bitcoin production compared to the same period last year. The company also said it had $0.35 in earnings per share (EPS) compared to an EPS loss of $0.62 in the third quarter of 2022.

Marathon revenue growthCryptocurrency remains a volatile industry, but Marathon has been able to steadily increase revenue, possibly making it among the best fintech stocks to buy. It should gain economy of scale from its recent purchase of two hosting sites from Generate Capital for $179 million

The move increases the company’s power capabilities and according to Marathon, will enable it to produce Bitcoin for 30% less than it currently does. The purchase should help Marathon bring in $200 million more in 2024 revenue. The move also represents a switch from depending on being a participant in a third-party operated mining pool to having its own assets. The company will have 45% directly owned sites and 55% hosted by third parties. 

The company has also diversified by adding Fidelity Digital Assets as an enterprise-grade custodian. This helps it secure its assets, protecting them from hackers. CFO Salman Khan said the company plans to add more custodians, further diversifying its asset security.

Marathon Digital price chart

2. StoneCo.: Best Fintech for Revenue Growth

The company concentrates on helping entrepreneurs and small businesses in Latin America’s largest economy, with $1.9 trillion in GDP in 2022. StoneCo. CEO Pedro Zinner, in November, said the company expects to grow net profits by eight times through the end of 2027, mostly by integrating its financial services and software operations.

StoneCo. Client base growth.The expected growth in Brazil’s population and the relatively low penetration of StoneCo.’s services means the company sees plenty of potential growth, estimated at 13% compound annual growth rate over the next four years. It appears to be among the fintech stocks with the highest potential.

StoneCo., in the third quarter, reported revenue of $3.1 billion Real (roughly $638.6 million), up 25.2%, year over year. It also grew net income by 108.7% compared to the same period last year to $411.3 million Real (roughly $8.4 million). StoneCo. price chart.

3. MercadoLibre: Top Fintech Stock for Changing Conditions

MercadoLibre has been profitable for the past two years and continues to grow its customer base, mainly in Brazil, though its fastest-growing operations are in Mexico, where it saw revenue rise 60%, year over year, in the third quarter. While the company is known for its e-commerce business, nearly half of its revenue stems from financial operations, including interest on installment payments and payment processing and its credit cards.

MercadoLibre net revenue growth chart.In the third quarter, the company reported revenue of $3.8 billion, up 69.1%, year over year and total payment volume (TPV) of $47.3 billion, up 121.2% over the same period last year. MercadoLibre said it had net income of $359 million, up 178%, year over year.

The company says it remains in “beta mode,” meaning it is continually looking to improve its businesses through change. It recently relaunched its loyalty program, dubbed MELI+, adding in premium video and audio content bundles, along with free shipping in some cases.

MercadoLibre price chart.

4. Block: Bouncing Back Along with Bitcoin’s Resurgence

The company, which delivers merchants a comprehensive commerce ecosystem, has continued to evolve and that’s what is helping its resurgence. It remains one of the best fintech stocks to invest in.

Block revenue growth chart.Block just approved a share repurchase plan of up to $1 billion, which has also helped give the stock a nudge. Investors were also encouraged when the company updated guidance to show it expects 2023 operating income between $205 million and $225 million, up from earlier estimates of $25 million.

Through nine months, Block reported revenue of $16.2 billion, up 25.3%, year over year, propelled by growth of its Cash App and Square revenue streams. Net income also grew from a loss of $426.9 million through nine months in 2022 to a loss of $168.3 million in the first nine months of 2023. 

The company has a big investment in Bitcoin and the blockchain technology surrounding digital coins and that has made its stock volatile. Now that Bitcoin’s prices are up, the company’s finances are too. 

Block price chart

5. Affirm Holdings: Benefiting from Inflation, High Interest Rates

The company is seeing plenty of growth, partially because it is helping retail companies increase sales. The company is a fintech company worth watching because it reported that merchants using Affirm reported cart sizes that were 60% higher in 2022 and 2021.

Affirm quarterly revenue growth chart.The most exciting reason to look at Affirm is its popularity among younger consumers. Its loans are often interest-free and have become popular, especially because of rising prices and interest rates on traditional loans.

In the first quarter of fiscal 2024, the company reported revenue of $497 million, up 37%, year over year. It also said it had gross merchandise volume of $5.6 million, up 28% over the same period last year. Affirm isn’t profitable yet and it reported a net loss of $209 million in the quarter, but that was an improvement from the $287 million it lost in the same period a year ago.

The company’s shares got a boost in November when the company signed an exclusive agreement with Amazon. Then last month, the company signed a BNPL deal with Google Pay, as well as one with Walmart that will enable its shoppers to use Affirm as a BNPL option on self-pay checkouts.

Affirm price chart

6. DraftKings: A Solid Bet for Continued Growth

The company’s business has soared since a 2018 Supreme Court decision that ended the federal ban on online sports betting. Now 38 states and the District of Columbia allow online sports betting, though for the moment, DraftKing’s app is legal in only 18 states, so the company has plenty of room to grow in the U.S. The company benefits from its status as an early mover in the field.

Draft Kings financial chartIn the third quarter, DraftKings reported revenue of $790 million, up 57%, year over year. It also showed improvement in net income, with a loss of $283.1 million, compared to a loss of $450.5 million in the same period last year, the fifth consecutive quarter it has trimmed its net losses.  The company said it foresees its online sports betting and iGaming total addressable market to jump from $20 billion in 2023 to $30 billion by 2028, just counting the states where DraftKings is currently allowed to operate in.

Looking forward to 2024, 12 states introduced legislation to allow mobile sports betting or introduced bills that may result in legal sports betting referendums. A key for DraftKings will be how well it is able to maintain market share as more companies ramp up to allow online sports betting.DraftKings price chart

7. PayPal: Poised for Resurgence in 2024

PayPal managed to thrive in 2023 despite the strong headwinds of inflation and higher interest rates that have made customers more cautious about spending. 

PayPal TPV chartIn the third quarter, PayPal reported revenue of $7.4 billion, up 8%, year over year while total payment volume grew 15% over the same period last year, to $387.7 billion. Net income was listed as $1.02 billion, down 23% and earnings per share (EPS) was $0.93, compared to $1.15 in the third quarter of 2022.

The company’s guidance, though, points to 6% to 7% in growth for fourth-quarter revenue and EPS of $1.20, compared to $1.15 in the same period last year.

PayPal price chart

8. Global Payments: Steadier Business than Most FinTech Companies

The company’s business had accelerated since its acquisition in 2022 of the global payment company EVO Payments, which focused on payment processing solutions such as fraud prevention, credit card terminal management and online payment platforms.

Global Payments total return chartIn the third quarter, Global Payments reported revenue of $2.48 billion, up 8%, year over year, and EPS of $1.39 compared to $1.05 in the same period a year ago, up 10.89%. Net income rose 24.7%, year over year, to $361.83 million  The company also grew operating margin from 16.9% in the third quarter of 2022 to 22.5%.

The company also offers something few fintech companies do: a quarterly dividend of $0.25 per share. Though the yield is only 0.79%, the company has increased the dividend by more than 90% over the past five years.

Global Payments price chart

9. Toast: Finding Strength Through Specialization

The software-as-a-service (SAAS) company focuses solely on supporting restaurants with its cloud-based, digital technology platform and integrated payment processing. There are more than 22 million restaurants in the world, so the opportunity for continued growth is there.

Toast locations chart.The restaurant industry continues to slowly come back from the pandemic. There continue to be headwinds, such as rising employee and food costs meaning lower profits. However, Toast had a strong year regardless.

In the third quarter, Toast reported revenue of $1.032 billion, up 37%, year over year with gross payment volume jumping 34%, year over year, to $33.7 billion. The company’s net loss was $31 million in the quarter, less than a third of the $98 million it lost in the same quarter last year.

Toast branched out in the quarter by adding a subgenre of its service specifically for bakeries and smaller cafes, called Toast for Cafes & Bakeries, with products for online catering ordering and restaurant retail, enabling such businesses to put point-of-sale products such as branded mugs or a bag of coffee beans on the same platform as the rest of the company’s foodservice.

Toast price chart

10. One97 Communications: Reorganization Will Drive Profitability

The company is the largest payments platform in India. It introduced mobile payments to the country and is using an advanced AI system to help financial institutions look for various risks, including fraud. The company has nearly doubled merchant subscriptions over the past year.

One97 merchant subscriptions chart.The company just announced it would lay off roughly 1,000 employees in a cost-cutting measure that it says will trim costs by 15%. That was spurred by second-quarter earnings where revenue grew but earnings fell for its Paytm business.

One97 said it had fiscal 2024 second-quarter revenue of $303 million, up 32%, year over year. The company also grew margins by 13% to 57%. However, it isn’t profitable yet, losing $35 million in net income, though that’s an improvement of $34 million over the same period last year.

One97 price chart

How to Pick the Best Fintech Stocks to Invest in

Fintech stocks aren’t always easy to analyze based on traditional metrics. Many fintech stocks are growth stocks that aren’t yet profitable, so using net income or EPS isn’t the best way to analyze these stocks, particularly for long-term investors.

Check on a Company’s Sales Volume Growth

Look for fintech stocks that are showing strong growth in customer acquisition or user engagement by measuring their total payment volume (TPV) or monthly active users growth. Other indicators to watch for growth include app downloads and average revenue per client.

Compare them Against Similar Competitors

See how a company’s revenue growth and profit margins compare to similar fintech companies. Even with unprofitable companies, it is useful seeing what a company’s price-to-book (P/B) ratio is in comparison to other fintech businesses.

Take a World View in your Research

Some of the fastest-growing fintech companies are in countries that are underserved by traditional banking and financial services. Don’t overlook investing in fintech companies that are based in Latin America, Africa and Asia.

Examine Each Company’s Competitive Landscape

How big is a particular company’s moat in comparison to other companies? Is it the lead in its particular area or is it a challenger hoping to make inroads? Fintech is a highly competitive industry, so it is important that a company establishes a niche that can insulate it from other companies. If it is a leader in a particular area of fintech, that’s an advantage.

Take a Look at Fintech Rankings

There are multiple places that rank fintech companies, based on various measurements. AltIndex, for example, has several ways to focus on fintech stocks, including a list of top fintech stocks based on AI scores and other data. 

Using AltIndex to Find Solid FinTech Stocks

You can discover solid fintech stocks by using AltIndex, a subscription service that uses artificial intelligence (AI) and alternative data. Every 30 minutes, the service updates its list of top Fintech stocks, based on the company’s algorithms and AI scores.

AltIndex fintech photoFintech’s rapid innovation can make stock picking in the sector difficult, but AltIndex’s list of top fintech stocks uses real-time updates on market changes and price movements, looking at a variety of metrics. Those scores are based on AltIndex data that looks at various advanced data from app downloads, to stock and employee sentiment, webpage traffic and business outlook.

Investors can also receive stock alerts from AltIndex on selected fintech stocks or use the service’s screen screener to analyze fintech stocks from a variety of alternative measurements, from job postings to Reddit mentions, to stock price, to webpage traffic.AltIndex fintech stock screener chart.AltIndex’s subscriptions run from a very basic free service to a more detailed Enterprise platform suitable for investment companies. Investors can try out AltIndex by starting with a $29 a month subscription on a free trial basis for 14 days. More advanced investors can try the company’s $99 subscription that includes unlimited use of the company’s platform and stock screener, along with 25 stock picks.

Some of the pluses to AltIndex is the ability to try out the service for two weeks for free, to see if it works for investors. The platform also tracks stocks as well as cryptocurrencies, which not every platform does. The biggest advantage to AltIndex is its ability, through alternative data, to examine stocks in a manner that isn’t easily done through traditional financial records.

Some of the downsides to AltIndex is the company’s algorithms still need human judgment to interpret and any interpretation of alternative data is still subjective. Another con to using AltIndex is it may lead investors to make decisions based on potential short-term gains, but that’s not always suitable for long-term investors.  

Conclusion

Investors who are seeking growth should look carefully at fintech stocks. Though their shares can be volatile, trends favor continued adoption of fintech services. As more consumers become accustomed to fintech services and banking, these businesses should thrive.

On top of that, if interest rates drop in 2024, as many expect, it’s reasonable to expect that fintech companies, particularly those of the “Buy Now, Pay Later” variety, will benefit. Fintech companies are coming up with innovative solutions that are disrupting traditional banking services and fintech companies are expanding into markets that have been underserved by traditional banking companies.

Investing in fintech allows investors to diversify their portfolios, especially as they present a solid long-term opportunity for growth. The difficult market over the past year for fintech companies has a positive side in that it highlights the companies that are thriving despite headwinds. As business conditions improve for fintech companies, those companies will be better able to take advantage to gain market share.

References

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Jim Halley

I am an experienced journalist who has also worked as an editor and writer at the Savannah Morning News, Salt Lake Tribune, USA Today, Stars and Stripes, and The Motley Fool. I spent the first half of my career in sports journalism, but in recent years have switched to writing about my other passion, stocks, particularly healthcare, real estate and consumer staples stocks. I've won numerous journalism awards from the Associated Press and state press associations and have been a judge for the Georgia Sportswriters Association. I've written one non-fiction book, Just One More Time, about Georgia Southern football, and…