In this article, we will explore the 7 most undervalued blockchain stocks to buy according to analysts.
Transforming Finance: The Impact of Blockchain Technology
The blockchain industry is witnessing significant trends that are shaping its future and expanding its use cases across various sectors. One of the most notable trends is the growth of Decentralized Finance (DeFi), which is transforming traditional financial systems by providing peer-to-peer financial services on public blockchains without intermediaries.
Established financial institutions are increasingly adopting blockchain technology to enhance transparency and efficiency. According to a report by The Business Research Company, the global market for blockchain in banking and financial services was valued at $4.61 billion in 2023. The market is expected to expand significantly at a compound annual growth rate (CAGR) of 40.4% during 2024-2028 to reach a value of $27.69 billion by the end of the forecast period.
According to the 2024 Geography of Cryptocurrency Report by Chainalysis, an American blockchain analysis firm, global crypto activity is on the rise. Between Q4 2023 and Q1 2024, the total value of global crypto activity increased significantly to surpass levels seen in 2021 during the crypto bull market.
In January 2024, the US Securities and Exchange Commission (SEC) approved the first spot Bitcoin exchange-traded funds (ETFs), marking a significant milestone for the cryptocurrency market. This approval led to a surge in Bitcoin activity across all regions, particularly in institutional-sized transfers and in regions with higher-income countries like North America and Western Europe. Meanwhile, stablecoin usage saw higher growth among retail and professional transfers, especially in lower-income areas such as Sub-Saharan Africa and Latin America. The Geography of Cryptocurrency Report also shows that DeFi services have seen substantial year-over-year growth, especially in areas like Sub-Saharan Africa, Latin America, and Eastern Europe.
Crypto investing is becoming more mainstream and institutionalized with Bitcoin ETFs. However, blockchain technology and tokenization also have the potential to disrupt the traditional ETF model. On September 28, CNBC reported that Janus Henderson, a leading global asset management group, has announced a partnership with Anemoy Limited and Centrifuge to launch the Anemoy Liquid Treasury Fund (LTF), a tokenized fund that provides investors direct access to short-term US Treasury bills. Nick Cherney, head of innovation at Janus Henderson, emphasized that this development represents an evolution in delivering investment services to clients more efficiently rather than a threat to the ETF industry.
This new fund will retain the typical features of an ETF while enabling trading on a blockchain platform. This offers investors benefits like 24/7 trading, instant settlement, and enhanced transparency regarding fund holdings, surpassing what traditional ETFs provide. Cherney stated that the firm aims to be at the forefront of this opportunity, which reflects a broader trend of integrating blockchain into financial services.
These trends highlight the growing interest in blockchain technology and its potential to reshape financial systems worldwide.
With this background in mind, let’s take a look at the 7 most undervalued blockchain stocks to buy according to analysts.
Methodology
To compile our list of the 7 most undervalued blockchain stocks to buy according to analysts, we reviewed our own rankings, sifted through ETFs, and consulted various online resources. From an initial pool of over 30 stocks involved in the blockchain space, we focused on those trading at under 23 times their forward earnings as of October 4. This helped us identify stocks that are cheaper than the S&P 500 Index, which has a forward P/E of 23.6 as of October 4 (as per WSJ).
We included only those stocks that are estimated to have positive earnings growth this year. From this list, we selected the stocks that analysts believe possess the greatest potential for growth. Finally, we ranked the 7 most undervalued blockchain stocks to buy according to analysts based on their average price target upside potential as of October 4, 2024.
Additionally, we mentioned the hedge fund sentiment surrounding each stock, which was taken from Insider Monkey’s database of 912 elite hedge funds as of Q2 of 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
7 Most Undervalued Blockchain Stocks To Buy According To Analysts
7. Nu Holdings Ltd. (NYSE:NU)
Forward P/E: 22.32
Earnings Growth: 72.00%
Analysts’ Upside Potential: 13.38%
Number of Hedge Fund Holders: 59
Nu Holdings Ltd. (NYSE:NU) is one of the world’s largest digital banking platforms, serving more than 100 million customers across Brazil, Mexico, and Colombia. The company offers a variety of services, including credit cards, digital accounts, and cryptocurrency trading.
Recently, the company launched a cryptocurrency transfer feature that allows customers to send and receive Bitcoin, Ethereum, and Solana directly from their wallets. This innovative service is designed to provide users with greater control over their crypto assets while maintaining competitive fees through a unique pricing model that stabilizes blockchain fluctuations. To ensure security and compliance, Nu Holdings Ltd. (NYSE:NU) is collaborating with Chainalysis to monitor transactions and protect against illicit activities.
On June 25, 2024, Nu Holdings Ltd. (NYSE:NU) announced a partnership with Lightspark to integrate the Bitcoin Lightning Network, Bitcoin’s second-layer blockchain, into its platform. This collaboration aims to enhance the Nu app by allowing faster and more cost-effective transactions for its customers. As part of this agreement, engineering teams from both companies will work together to explore new blockchain solutions. The integration of Lightning will enable Nubank to offer innovative features that improve user experience. With this move, the company reinforces its commitment to providing efficient financial services and positions itself as a leader in the evolving blockchain landscape.
Overall, the company has shown remarkable growth in its business operations, reaching 105 million customers by the end of Q2 2024, a 60% increase from two years ago. The company continues to excel in Brazil, adding an average of 1.2 million new customers monthly, bringing the total to 95.5 million in that region. Mexico is also thriving, with 1.2 million new customers added in the quarter, resulting in 7.8 million total customers. Colombia exceeded the 1 million customer milestone, ending the quarter with nearly 1.3 million customers. This growth solidifies Nu’s position as the leading digital financial platform in Latin America.
The company reported a revenue of $2.8 billion for the second quarter of 2024, reflecting a 65% year-over-year increase driven by successful cross-selling, upselling, and new product introductions. The gross profit reached $1.4 billion, marking an impressive 88% growth year-over-year with a gross margin of 47.7%. Net income climbed to $487 million, representing a 134% increase compared to the previous year, while adjusted net income hit $563 million, up 131% year-over-year.
Nu Holdings Ltd. (NYSE:NU) has established a strong business model centered on consistent customer growth, innovative product offerings, and efficient operations. Analysts are also bullish on NU and have a consensus buy rating on the stock. The 12-month median price target set by analysts indicates a potential upside of 13.38% from current levels.
According to Insider Monkey’s Q2 database of over 900 hedge funds, 59 hedge funds held stakes in Nu Holdings Ltd. (NYSE:NU). As of June 30, Berkshire Hathaway holds 107.11 million shares of the company, valued at $1.38 billion, making it NU’s most prominent shareholder.
6. WisdomTree Inc. (NYSE:WT)
Forward P/E: 14.47
Earnings Growth: 67.60%
Analysts’ Upside Potential: 26.39%
Number of Hedge Fund Holders: 20
WisdomTree Inc. (NYSE:WT) is a global financial innovator that leverages blockchain technology to offer a diverse range of exchange-traded products (ETPs), solutions, and services. The company has developed and launched innovative digital products, services, and structures that provide enhanced access, transparency, and user experience. These include the company’s digital or blockchain-enabled mutual funds and tokenized assets, as well as its blockchain-native digital wallet, WisdomTree Prime.
On September 18, 2024, the company launched WisdomTree Connect, a new platform designed to provide broader access to tokenized real-world assets (RWAs). This innovative platform aims to allow users to interact with any WisdomTree-issued token, in any wallet, across supported blockchains. Users can access WisdomTree digital funds using their own wallet infrastructure, including businesses and institutional clients. The platform will enable firms to access yield-generating products like the WisdomTree Government Money Market Digital Fund directly on-chain. This solution streamlines the investment process, making it easier for crypto-native institutions to manage their assets without needing to convert stablecoins into fiat currency first.
During the second quarter of 2024, WisdomTree Inc. (NYSE:WT) has demonstrated strong financial performance with record assets under management (AUM) of $109.7 billion. The company reported revenues of $107 million, marking a 25% increase compared to the same quarter last year, thanks to higher average AUM. Operating margins expanded significantly, achieving over 35%, while earnings per share rose by 78% year-over-year.
The company is actively pursuing both business-to-business (B2B) and direct-to-consumer initiatives. In the Q2 2024 earnings call, management shared that WisdomTree Prime, the company’s direct-to-consumer app, is now available in 44 states, reaching nearly 80% of the US population.
WisdomTree Inc.’s (NYSE:WT) effective strategies and operational efficiency have helped it establish itself as a significant player in the evolving landscape of blockchain finance. It ranks among the most undervalued stocks in the blockchain space.
WT can be considered cheap at current levels. It is trading at 14 times its forward earnings. Additionally, analysts have a consensus buy rating on the stock. The median 12-month stock price target set by analysts indicates a potential upside of 26.39% from current levels. WisdomTree Inc. (NYSE:WT) was held by 20 hedge funds in Q2 2024.