We recently compiled a list of the 10 Best Fintech Stocks To Buy in 2024. In this article, we are going to take a look at where MercadoLibre, Inc. (NASDAQ:MELI) stands against the other fintech stocks.
A Breakdown of the Global Fintech Industry
Based on a collaboration between the World Economic Forum and the Cambridge Centre for Alternative Finance, a report revealed that the global fintech industry has been strong post-pandemic with the average global customer growth rates above 50% from 2021 to 2022. In this growing market, fintechs are bringing tailored financial services and products to underserved segments of the population. These segments make up a sizeable portion of the consumer base of fintech firms operating in both advanced economies and in emerging markets and developing economies.
For the second year in a row as reported by CNBC, payments serve as the largest individual industry segment with a 24% share, although it is really fragmented with many firms moving money across the globe. Alternate finance which encompasses crowd-funding apps and online lenders follows with a 16% share. Other segments and their relative shares include 14% of neo-banking, 12% of wealth technology, 10% of business process solutions, 10% of banking solutions, 8% of financial planning, and 6% of digital assets. Country-wise, the US serves as the single biggest fintech market which hosts 46% of the top 250 fintech companies. Meanwhile, the UK hosts 12% while India is home to 4% of these companies. India has replaced both Germany and France due to its rapidly increasing digital adoption.
Current Landscape for Fintechs
In the prevailing industry landscape, fintech companies that are on the lower end appear to be better off. Previously, Bank of America’s CEO mentioned the consumer to be very stable and not getting worse. On the contrary, JP Morgan Chase COO Daniel Pinto warned that net interest income is going to be challenging next year with the expected Fed rate cuts just on the horizon. Ally Financial CFO talked about worse conditions as its borrowers are facing job market weakness as an increasing concern other than inflation.
In an interview with CNBC, Dan Dolev, senior analyst in fintech equity research at Mizuho, emphasized the rising consumer credit concerns. In his opinion, the fintech players with more exposure to the lower income consumers are doing better. He mentioned that low-end consumers had a lot of steamy money that they spent beyond their means. These consumers have pulled back on their spending to pay back their loans after depleting their savings 6 or 12 months ago. Meanwhile, the prime consumers are now facing the same pressure subprime consumers faced several months ago.
Our Methodology:
In order to compile a list of the 10 best fintech stocks to buy in 2024, we first used stock screeners and relevant ETFs to make an extended list of the relevant companies with the highest market caps. Moving on, we shortlisted the top 10 stocks from our list which had the highest number of hedge fund holders. The 10 best fintech stocks to buy in 2024 have been arranged in ascending order of their hedge fund holders, as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. 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).
A customer using their phone to access an online commerce platform.
MercadoLibre, Inc. (NASDAQ:MELI)
Number of Hedge Fund Holders: 84
MercadoLibre, Inc. (NASDAQ:MELI) is Latin America’s leading fintech and e-commerce company. With the agenda of democratizing commerce and financial services in Latin America, the company was founded 25 years ago. Hence, it enables e-commerce and digital financial services for its users through a complete suite of technology solutions. The firm has a presence in 18 countries including Argentina, Brazil, Mexico, Colombia, Chile, and Peru.
MercadoPago, the firm’s fintech platform, provides a comprehensive set of financial technology services. For individuals, it has a digital account offering a debit card, online payments, insurance, savings, investments, and credit lines. For merchants, it provides online and physical point-of-sale payment processing services and a digital account. With financial services ripe for disruption in the chosen markets, the company operates a fintech business that matches the lowest cost-to-serve in the region. This highly profitable business positions MercadoLibre for market share gains across the region. It is also building MELI+ with the goal of being the largest and most valued regional loyalty program. At the same time, the firm is a top digital commerce platform in Latin America, a region with one of the fastest-growing Internet penetration and e-commerce growth rates globally.
The firm delivered a strong top-line and bottom-line growth during the fiscal second quarter. With a 20% rise in gross merchandise volume and a 36% rise in total payment volume, the revenue increased by 42% year-over-year. Net income rose by 103% as compared to the prior year. The strength of MercadoLibre, Inc. (NASDAQ:MELI) across geographies is evident from revenue growth of 51% year-over-year in Brazil and 66% year-over-year in Mexico. The Commerce and Fintech revenue streams continue to grow, with 53% and 28% increases since 2023 respectively. Furthermore, the adjusted free cash flow of $678 million in Q2 and $838 million year-to-date demonstrates the firm’s ability to generate cash even when it is investing in other growth opportunities.
With a solid market cap of $102.91 billion, a diversified mix of revenue, and a significant potential for growth as a leading fintech and an e-commerce platform, investors can consider MercadoLibre, Inc. (NASDAQ:MELI). The company’s prior financial performance has also been consistently strong. Over the past 5 years, the company has managed to grow its revenue by 56.85% and its net income by 145.56%. As of Q2, the stock is held by 84 hedge funds while Generation Investment Management is the most prominent shareholder.
Overall MELI ranks 4th on our list of the best fintech stocks to buy. While we acknowledge the potential of MELI as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than MELI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.