3 Top Fintech Stocks to Buy in September

Many fintech stocks have been crushed over the past two years as rising interest rates cooled the economy and drove investors to more conservative investments. But with interest rates expected to decline in the coming quarters, it could be a good time to buy some of the market’s unloved fintech stocks while the bulls look the other way.

So if you’re looking for turnaround pieces in the fintech sector, you should focus on companies with defensible niches, robust sales growth and improving margins. Also, their shares should trade at reasonable valuations. I think these three actions are appropriate: Robinhood Markets (CAGONA -3.71%), affirm (AFRM -3.03%)and Not Holdings (NOT -4.46%).

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1. Robinhood Markets

Shares of Robinhood are down more than 70% from their all-time high and are currently trading nearly 50% below their initial public offering (IPO) price.

The online brokerage and crypto trading platform that popularized commission-free trading among smaller retail investors has lost its luster as rising interest rates have cooled meme and crypto stock markets.

But over the past year, the business has stabilized as expectations of lower rates and the expansion of the subscription-based Gold plan brought back investors.

As a result, the number of funded customers, monthly active users (MAUs) and assets under custody grew steadily again, and its revenue rose 37% to $1.87 billion in 2023, eclipsing the record in pandemic period of $1.82 billion in 2021. .

Its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) also improved from negative $94 million in 2022 to positive $536 million in 2023 as it executed two rounds of layoffs and other aggressive cuts of costs.

In 2024, analysts expect Robinhood’s revenue and adjusted EBITDA to grow 39% and 104%, respectively, as the macro environment improves. Its stock still looks reasonably valued at 33 times this year’s adjusted EBITDA, and could gain much more attention as retail investors are once again actively trading more stocks, options and cryptocurrencies.

2. Affirm

Affirm shares are down 75% from their all-time high and still trade 15% below their IPO price. The Buy Now Pay Later (BNPL) service provider initially grew like a weed as it won over large merchants such as Amazon and Walmartbut its growth cooled as more competitors cracked the market and inflation reduced consumer spending.

This slowdown was exacerbated by the crash Peloton Interactivewho became one of his top customers during the pandemic.

As its growth slowed, rising rates highlighted its persistent losses and compressed its valuations. But in fiscal 2024 (which ended June 30), its revenue rose 46% to $2.32 billion — compared with 18% growth in fiscal 2023 — as adjusted operating margin of increased from 5% negative to 16% positive.

Adjusted EBITDA also improved from negative $1.07 billion to negative $447 million as it laid off about a fifth of its workforce and cut other expenses.

For fiscal 2025, analysts expect the company’s revenue to grow 29% to $3 billion as adjusted EBITDA improves again to $58 million. We should take these estimates with a grain of salt, but they indicate that he is successfully expanding his business. Apple’s recent shutdown of its BNPL service could also drive more buyers to Affirm.

3. No Holdings

It is not an online bank that serves customers in three Latin American countries: Brazil (its home market), Mexico and Colombia. From the end of 2021 to the second quarter of 2024, the company tripled its number of customers from 33.3 million to 104.5 million and became the fourth largest financial institution in Latin America.

Nu’s online-only approach has allowed it to expand its business at a much faster rate than its brick-and-mortar competitors. It is also rapidly expanding its ecosystem with new cryptocurrency trading options, cross-border payment tools, and AI services for analyzing customer data, operating chatbots, and strengthening its security features.

From 2021 to 2023, Nu’s activity rate (its active customers divided by total customers) increased from 76% to 83% as its average monthly revenue per active customer doubled. However, its average monthly cost to serve each active customer has remained constant throughout all three years, even as it rapidly expanded its ecosystem.

Its revenue grew at a CAGR of 117% from 2021 to 2023. It also became profitable on a GAAP basis in 2023. Analysts expect Nu’s revenue and adjusted earnings to grow 40% and 68% in 2024, respectively — but its shares trade at just 25 times forward earnings. Its valuations are likely to be squeezed by inflationary challenges in Latin America, but could rebound quickly once these headwinds dissipate.