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 PayPal Holdings, Inc. (NASDAQ:PYPL) 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 consumer in a cafe paying for goods using a mobile payment app.
PayPal Holdings, Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 87
PayPal Holdings, Inc. (NASDAQ:PYPL) enables digital payments on behalf of merchants and consumers globally. The firm was founded as the world’s first digital payment platform and has been revolutionizing commerce globally for more than 25 years. The fintech company classifies its revenues into two categories, transaction revenues and revenues from other value-added services.
PayPal Holdings, Inc. (NASDAQ:PYPL) has a unique advantage that is difficult to replicate. It stands as one of the only players with both sides of the network, consumer as well as merchant, at scale globally. The firm continues to build more omnichannel capabilities while bringing more value-added services for consumers and merchants to the table. Apart from the distinctiveness and the motivation to drive long-term growth, the firm has strong financial results to offer.
Highlights from the fiscal second quarter include net revenues increasing 8% to $7.9 billion, transaction margin dollars increasing 8% to $3.6 billion, total payment volume increasing 11% to $416.8 billion, and payment transactions increasing 8% to 6.6 billion. The firm recorded its best transaction margin dollar growth since 2021. As of year-end 2023, PayPal has 426 million active consumer and merchant accounts, $1.53 trillion total payment volume, and 25 billion payment transactions. Hence, PayPal is positioned well for long-term durable, and profitable growth.
In the words of former CEO Bill Harris, Paypal is a rather mature and strong company built on the strength of its market position, financials, and balance sheet. Based on these strengths across PayPal, the company has also raised its guidance for growth in transaction margin dollars and earnings per share. The firm operates in a $6 trillion-plus global e-commerce market that benefits from the current digitization of payments and is hence, poised to grow. As of Q2 2024, PayPal Holdings, Inc. (NASDAQ:PYPL) was held by 87 hedge funds thereby ranking on our list. Citadel Investment Group was the top shareholder with a stake worth $469 million.
Overall PYPL ranks 3rd on our list of the best fintech stocks to buy. While we acknowledge the potential of PYPL 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 PYPL 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.