5 Most Promising Fintech Stocks To Buy

In this article, we will be taking a look at the 5 most promising fintech stocks to buy. To read our detailed analysis of the fintech sector, you can go directly to see the 12 Most Promising Fintech Stocks To Buy.

5. Intuit Inc. (NASDAQ:INTU)

Upside Potential as of February 22: 22.51%

Average Price Target: $480.36

Number of Hedge Fund Holders: 92

Intuit Inc. (NASDAQ:INTU) is an application software company providing financial management and compliance products and services. It is based in Mountain View, California.

Josh Beck at KeyBanc holds an Overweight rating on Intuit Inc. (NASDAQ:INTU) shares as of January 4. The analyst also raised his price target on the stock from $400 to $425.

Intuit Inc. (NASDAQ:INTU) has been growing its customer base over the past few years, and with its shift to the online ecosystem, analysts now forecast a customer growth of 11.9%, reaching 12.6 million by 2027. The company’s online ecosystem has a five-year average growth of 39.4%.

There were 92 hedge funds long Intuit Inc. (NASDAQ:INTU) at the end of the fourth quarter. Their total stake value was $5.6 billion.

Fundsmith, an investment management company based in London, mentioned Intuit Inc. (NASDAQ:INTU) in its 2022 yearly investor letter. Here’s what the firm said:

“Take the example of Microsoft and Intuit Inc. (NASDAQ:INTU). Microsoft shares are currently being valued at a P/E ratio of 25.0 times the consensus EPS estimate for the fiscal year ending June 2023. Meanwhile, Intuit is being valued at 28.4 times the non-GAAP consensus estimate for the fiscal year ending July 2023. Many investors and analysts may accept that Intuit is trading at a higher multiple given expectations of greater growth potential. However, Intuit removes share-based compensation from their non-GAAP EPS whereas Microsoft does not. Given that Intuit’s GAAP EPS guidance for the year ending 31st July 2023 is $6.92–$7.22, its non-GAAP guidance is $13.59–$13.89, and the consensus estimate for 2023 EPS is at $13.69, it seems clear that most sell-side analysts are accepting the company’s non-GAAP adjustments, which includes the removal of some $1.8bn of share-based compensation, in their estimates. If we include the impact of share-based compensation in Intuit’s 2023 EPS to make a more apples-to-apples comparison with Microsoft based upon GAAP EPS, Intuit’s 2023 EPS would be closer to $9, meaning that the shares would be trading at a multiple of about 43 times. I think investors and analysts may find a premium of 14% for Intuit over Microsoft (28.4 times versus 25.0 times) to be reasonable. I’m not so sure they are fully aware that Intuit shares are actually trading at a premium of 73% if share-based compensation is treated in the same manner between the two companies.

Many investors and analysts, including us, look to cash flow metrics more than accrual profits. Unfortunately, share-based compensation may cause distortions in cash flow metrics as well, even when they follow GAAP. Under GAAP, share-based compensation is added back in the cash flow from operating activities, which in turn is used in the computation of free cash flow.  ..” (Click here to read the full text)

4. Bank of America Corporation (NYSE:BAC)

Upside Potential as of February 22: 16.98%

Average Price Target: $40.17

Number of Hedge Fund Holders: 100

Bank of America Corporation (NYSE:BAC) is a diversified banking company. It has launched several digital financial solutions for its clients to consolidate funds and make digital payments to their customers.

Citigroup analyst Keith Horowitz holds a Neutral rating on Bank of America Corporation (NYSE:BAC) shares as of January 17.

Bank of America Corporation (NYSE:BAC) has a P/E ratio of 9.9, which is relatively low for a banking stock. The company has been working to diversify its loan mix over the past few years, which has reduced its overall credit risk as well. Since 2009, the bank has reduced its consumer loans to 44% in 2022. It has also increased commercial loans to 56% over the same period. These measures are enabling to company to perform well in 2023.

Out of the 943 hedge funds tracked by Insider Monkey in the fourth quarter, 100 funds were long Bank of America Corporation (NYSE:BAC). Their total stake value was $37.6 billion.

3. Paypal Holdings, Inc. (NASDAQ:PYPL)

Upside Potential as of February 22: 49.94%

Average Price Target: $111.73

Number of Hedge Fund Holders: 115

Paypal Holdings, Inc. (NASDAQ:PYPL) is an information technology company based in San Jose, California. It operates a tech platform that enables digital payments.

An Outperform rating was reiterated on Paypal Holdings, Inc. (NASDAQ:PYPL) shares on February 13 by James Fotheringham at BMO Capital. The analyst also placed a $108 price target on the stock.

At the end of the fourth quarter, 115 hedge funds were long Paypal Holdings, Inc. (NASDAQ:PYPL). Their total stake value was $5.1 billion.

RiverPark Advisors, an investment advisory firm, mentioned Paypal Holdings, Inc. (NASDAQ:PYPL) in its fourth-quarter 2022 investor letter. Here’s what the firm said:

“PayPal Holdings, Inc. (NASDAQ:PYPL)l: PayPal shares were a top detractor for 4Q, reporting slightly weaker than expected 3Q payment volumes and 4Q payment volume guidance. The company nevertheless reported betterthan-expected EPS on improved margins. PYPL operates at significantly lower margins than its payment competitors Visa and Mastercard, and 3Q results and 4Q guidance show early improvements in its margins and ability to drive higher cash flow growth in the near term. For 3Q, PYPL reported $1.8 billion of FCF, the highest quarterly FCF number in its history, representing 37% growth. The company expects continued operating margin expansion for 4Q and full year FCF of more than $5 billion, representing a 6% FCF yield.

PayPal is the most accepted digital wallet – with almost triple the acceptance of Apple Pay, the number two digital wallet. PayPal is a key beneficiary of the ongoing shift to ecommerce driven digital payments, as well as consumer-to-consumer payment trends through its Venmo peer-topeer (P2P) payment service. With a 3Q non-GAAP operating margin of 22%, PYPL also has significant margin expansion potential given that competitors Adyen, Visa and Mastercard have 50%-65% operating margins. We believe the combination of secular growth, expanding operating leverage and the strategic use of the company’s significant and growing cash balance should fuel high teens earnings growth over the next five years. This, to us, presents an excellent risk/reward given that PYPL trades at a below market multiple.”

2. Mastercard Incorporated (NYSE:MA)

Upside Potential as of February 22: 18.96%

Average Price Target: $422.65

Number of Hedge Fund Holders: 139

Mastercard Incorporated (NYSE:MA) is a data processing and outsources services company. It has added the Mastercard Fintech Express to its Mastercard Accelerate platform to allow fintechs to get access to digital-first products.

Dan Dolev at Mizuho holds a Buy rating on Mastercard Incorporated (NYSE:MA) shares, alongside a $405 price target, as of January 30.

A total of 139 hedge funds were long Mastercard Incorporated (NYSE:MA) in the fourth quarter. Their total stake value was $15.7 billion.

Baron Funds, an investment management company, mentioned Mastercard Incorporated (NYSE:MA) in its fourth-quarter 2022 investor letter. Here’s what the firm said:

“Shares of global payment network Mastercard Incorporated (NYSE:MA) increased after reporting strong quarterly results, with 15% revenue growth and 13% EPS growth despite significant headwinds from currency movements and the suspension of operations in Russia. Payment volume grew 21% in local currency (excluding Russia) as consumer spending remained resilient and the international travel recovery continued as border restrictions were lifted. We continue to own the stock due to Mastercard’s long runway for growth and significant competitive advantages.”

1. Visa Inc. (NYSE:V)

Upside Potential as of February 22: 18.4%

Average Price Target: $260.81

Number of Hedge Fund Holders: 177

Visa Inc. (NYSE:V) is a payments technology company based in San Francisco, California. The company is a world leader in fintech and digital payments.

Barclays’ Ramsey El-Assal holds an Overweight rating on Visa Inc. (NYSE:V) shares as of January 29, alongside a price target of $270.

The company’s market share in the credit card networks area is 52.6%, and it also has a high operating margin of over 67%. Visa Inc. (NYSE:V) saw revenue growth of 12.4% year-over-year in the fiscal first quarter of 2023, bringing in revenues of $7.94 billion. Analysts are highly optimistic on the stock, with Mizuho raising its price target on Visa Inc. (NYSE:V) from $220 to $240, for example.

Out of the 177 hedge funds long Visa Inc. (NYSE:V) in the fourth quarter, TCI Fund Management was the largest shareholder in the company. The fund held 19.9 million shares. The total stake value in the company was $26.5 million.

Baron Funds, an investment management company, mentioned Visa Inc. (NYSE:V) in its fourth-quarter 2022 investor letter. Here’s what the firm said:

“Shares of global payment network Visa Inc. (NYSE:V) increased after reporting strong quarterly results, with 19% growth in revenue and EPS despite currency headwinds and the suspension of operations in Russia. Payment volume grew 16% in local currency (excluding Russia and China) with notable strength in cross-border volumes driven by rebounding international travel. Management also provided encouraging guidance for the next fiscal year. We continue to own the stock due to Visa’s long runway for growth and significant competitive advantages.”

See also 12 Best Fintech Stocks To Buy and 11 Best Motley Fool Stocks To Buy.