11 Best Digital Payments Stocks To Buy Now
In this article, we discuss 11 best digital payments stocks to buy now. If you want to see more stocks in this selection, check out 5 Best Digital Payments Stocks To Buy Now.
Digital money transactions are rising swiftly in emerging markets as innovations increase. Banks, fintechs, and telecom companies must rapidly create strategies to take up market share. Digital payment transactions have grown quickly in emerging markets in the last two years, and the COVID-19 pandemic helped the transition to digital payments and e-commerce.
People leaned more towards e-wallets, online payments, direct bank transfers, and companies partnered with digital money providers to extend their customer base during the peak pandemic years. Africa and Southeast Asia saw the fastest acceleration in digital payments, as these regions have lesser banking access, which leaves higher potential to tap into underserved populations. Another significant development of the pandemic years has been the popularity of “buy now, pay later”, a type of short-term credit used by companies which enables consumers to divide payments into installments.
On November 24, Rodney Bain, co-founder and US president of payments fintech Apexx Global, told Financial Times:
“The pandemic had a profound effect on digital payments, driven by two key factors. The fundamental inability for consumers to make in-store transactions during lockdowns and general discomfort with exposure to physical environments; and the economical strain felt by consumers during the pandemic.”
We selected the following digital money stocks based on positive analyst coverage, strong business fundamentals, and future growth prospects. We have assessed the hedge fund sentiment from Insider Monkey’s database of 920 elite hedge funds tracked as of the end of the third quarter of 2022.
Best Digital Payments Stocks To Buy Now
11. Futu Holdings Limited (NASDAQ:FUTU)
Number of Hedge Fund Holders: 14
Futu Holdings Limited (NASDAQ:FUTU) is a Hong Kong-based company that operates an online brokerage and wealth management platform in Hong Kong and internationally. The company offers trading, clearing, settlement services, margin financing, securities lending services, and stock yield enhancement programs.
On November 21, the company reported a Q3 GAAP EPADS of $0.68, beating market estimates by $0.07. The revenue of $247.9 million also outperformed Wall Street estimates by $19.75 million. Futu Holdings Limited (NASDAQ:FUTU)’s total number of paying clients increased 23.8% year-over-year to 1,444,955 as of September 30, 2022.
Investment advisory DBS Bank initiated coverage of Futu Holdings Limited (NASDAQ:FUTU) on October 24 with a Buy rating and a $55 price target.
Among the hedge funds tracked by Insider Monkey, 14 funds reported owning stakes worth $113.3 million in Futu Holdings Limited (NASDAQ:FUTU) at the end of Q3 2022, compared to 9 funds in the prior quarter worth $153.2 million. Israel Englander’s Millennium Management is the largest stakeholder of the company, with 1.3 million shares valued at $49 million.
Like Visa Inc. (NYSE:V), Mastercard Incorporated (NYSE:MA), and PayPal Holdings, Inc. (NASDAQ:PYPL), Futu Holdings Limited (NASDAQ:FUTU) is one of the best digital money stocks to invest in.
Here is what Tao Value has to say about Futu Holdings Limited (NASDAQ:FUTU) in their Q1 2021 investor letter:
“Futu is a new “Opportunistic” position. It is an HK based online brokerage & wealth management platform with deep roots in technology. Futu sits in the confluence of 3 strong favorable forces of Meteorology, Topography & Commander, yet was underpriced at the time of our entry. In terms of Meteorology, there is a huge addressable market of Chinese domestic middle to upper classes’ wealth being deployed to overseas assets allocation in the next decade. Additionally, the incumbents being disrupted are extremely weak in their digital transformation. On Topography, Futu’s user-centric product design built an intuitive front end and great user experience, while the digital native development framework built a solid & reliable back end (including a self-developed order routing & execution system for the HK market). This is a rare combination compared to both offline incumbents (who lack flashy front end & UX) & other new online disrupters (who lack solid infrastructure). On Commander factor, founder CEO Li Hua was a Tencent engineer in its early days with deep knowledge in product design and development. Li is said to be a fanatic product manager, to this day still at the front-line, alpha testing any new features. Based on analyses of these factors, I think Futu could compound its revenue at a very high rate with very high certainty and with strong operating leverage, putting our entry price very attractive compared to earning power in 3-5 years. Yet just as we finished building a small position, the price started to take off and more than tripled in a month. When such price action happens, it is obvious that Mr. Market has turned very euphoric to this name. I decided to trim but kept a reasonable position given its growth certainty.”
10. Green Dot Corporation (NYSE:GDOT)
Number of Hedge Fund Holders: 22
Green Dot Corporation (NYSE:GDOT) is a Texas-based financial technology and bank holding company that provides financial products to consumers and businesses in the United States. It operates through three segments – Consumer Services, Business to Business Services, and Money Movement Services. It is one of the best digital money stocks to monitor.
On November 9, Green Dot Corporation (NYSE:GDOT) reported a Q3 non-GAAP EPS of $0.44 and a revenue of $337.2 million, outperforming Wall Street estimates by $0.09 and $7.19 million, respectively. The company sees year-over-year growth in revenue per account and positive trends in its GO2bank product.
Barclays analyst Ramsey El-Assal on November 14 maintained an Equal Weight rating on Green Dot Corporation (NYSE:GDOT) but trimmed the price target on the shares to $21 from $25 following the Q3 earnings.
According to Insider Monkey’s Q3 data, 22 hedge funds were long Green Dot Corporation (NYSE:GDOT), compared to 26 funds in the prior quarter. Jeffrey Smith’s Starboard Value LP is the largest position holder in the company, with 5.3 million shares worth $100.5 million.
Here is what Steel City Capital has to say about Green Dot Corporation (NYSE:GDOT) in its Q4 2021 investor letter:
“The Partnership recently established new positions in Green Dot (GDOT). As for GDOT, the company is a collection of old-school money access/money movement operations as well as new-school “FinTech” offerings. It is perhaps best known as the banking partner behind Wal-Mart’s prepaid MoneyCard debit card. Prepaid debt is among the least sexy financial service offerings in the market and I also suspect there’s a degree of snobbery among the investing class that its primary customers sit on a lower socio-economic rung. I think these factors are contributing to today’s opportunity.
One of the emerging trends in the “FinTech” space is integration of banking and payment services by consumer facing companies. The idea is that by integrating these services, companies can collect more data on spending patterns, drive a “stickier” customer relationship/brand loyalty, and ultimately drive more sales. At the same time, such consumer facing companies either can’t, or won’t, build out these platforms on their own. Doing so would require, among other things, 1) a specific degree of technological expertise and 2) ownership and control of a banking institution. The latter of the two factors – owning a banking charter – is a significant deterrent to “going it alone.” Owning a bank requires costly and time consuming compliance (AML/KYC, etc.) and ongoing regulatory scrutiny. Over the years, a long list of household names with financial services ambitions (including Wal-Mart) have either tried and failed, or proactively decided against owning and operating a bank. This is where someone like GDOT comes in, supplying the technical know-how and offering use of their banking charter without the headaches of actually becoming a regulated bank. In industry parlance, this has come to be known as “Banking-as-a-Service” or BaaS, for short.
GDOT’s relationship with Wal-Mart has shifted more in the direction of BaaS than “just” prepaid debit with WalMart last year converting all of their existing prepaid accounts to demand deposit accounts intended to function similarly to a traditional banking account. MoneyCard now comes complete with an app and various features like overdraft protection, early payday, and cashback on Wal-Mart purchases. Beyond Wal-Mart, GDOT has expanded its BaaS offerings with other large brands. Another interesting use case is its Partnership with Intuit’s QuickBooks. When you open a new QuickBooks business account, you’re given the option to open a QuickBooks branded business checking account at the same time, which is powered on the back-end by GDOT. There’s a lot of white space out there for GDOT to work with additional consumer facing companies to integrate payments and other banking services into their platforms. I’ll acknowledge that GDOT is far from the only “player” in the arena, but the mere fact that they’ve already bagged a number of large name clients on the BaaS side (Intuit/QuickBooks, Apple/Apple Cash, Uber/Uber Checking) at least suggests their capabilities and offerings have passed an intense amount of scrutiny…” (Click here to see the full text)
9. Affirm Holdings, Inc. (NASDAQ:AFRM)
Number of Hedge Fund Holders: 26
Affirm Holdings, Inc. (NASDAQ:AFRM) is a California-based company that provides a platform for digital and mobile-first commerce in the United States, Canada, and internationally. The company’s platform includes point-of-sale payment solutions for consumers, merchant commerce solutions, and a consumer-focused app. Affirm Holdings, Inc. (NASDAQ:AFRM)’s revenue of $361.62 million grew 34.2% year-over-year, beating Wall Street estimates by $1.15 million.
On November 10, DA Davidson analyst Christopher Brendler reiterated a Buy rating on Affirm Holdings, Inc. (NASDAQ:AFRM) but lowered the price target on the shares to $32 from $50 after its FQ1 results and updated guidance. The company reported a solid quarter against increasing macro headwinds and while the stock sold off, he is not worried as underlying trends suggest Affirm Holdings, Inc. (NASDAQ:AFRM) continues to significantly outperform peers, the analyst wrote in a research note.
According to Insider Monkey’s data, 26 hedge funds were bullish on Affirm Holdings, Inc. (NASDAQ:AFRM) at the end of September 2022, compared to 27 funds in the prior quarter. Colin Moran’s Abdiel Capital Advisors is a prominent stakeholder of the company, with 2.16 million shares worth $40.7 million.
Here is what Bireme Capital specifically said about Affirm Holdings, Inc. (NASDAQ:AFRM) in its Q2 2022 investor letter:
“We recently covered our short position in Affirm Holdings, Inc. (NASDAQ:AFRM) after a rapid decline brought the share price to ~$30 – down from our entry point above $100 – in only 7 months. We discussed Affirm in our Q4 letter, saying the following:
Affirm is a “Buy Now, Pay Later” (BNPL) company founded by former PayPal CTO and cofounder Max Levchin. They provide installment loans to consumers, partnering with retail companies looking to drive higher sales. They have two primary products: a zero-fee installment loan for consumers with the best credit scores, and a more traditional product with 20%+ interest rates for subprime borrowers. Their stated plan is to disrupt the credit industry with more transparent, lower-fee loans. At a roughly $28b market cap at the start of 2022, AFRM stock was priced at more than 20x trailing sales, a steep price for a money-losing lender. While their early lead in online BNPL transactions and partnerships with fast-growing retailers like Peloton has fueled significant historical growth, a wave of competition has arrived… While the stock has already fallen sharply from where we initiated our short position, we think it could fall another ~40% to trade at 8x FY2022 sales.
Interestingly, not much has changed about Affirm’s business from when it sported a $28b market cap. Estimates for 2022 sales have been inching up, from $1.25b at the start of the year to $1.35b today. And analysts estimate that the company will lose about $150m of EBITDA this year, slightly better than estimates in January. Rather than a story of deteriorating business fundamentals, this was a story of market participants simply deciding that a fast-growing, money-losing subprime lender – even a disruptive one – with around $1b of revenues should not be worth twenty-eight billion dollars. We think the current valuation is much more reasonable, and we do believe that Affirm will eventually generate profits from its lending platform, so we covered our short position.”
8. Fiserv, Inc. (NASDAQ:FISV)
Number of Hedge Fund Holders: 59
Fiserv, Inc. (NASDAQ:FISV) is a Wisconsin-based company that provides payment and financial services technology worldwide. The company operates through Acceptance, Fintech, and Payments segments. It is one of the best digital money stocks to consider buying. Fiserv, Inc. (NASDAQ:FISV) raised its full-year 2022 outlook and now expects organic revenue growth of 11% and adjusted earnings per share of $6.48 to $6.55, representing growth of 16% to 17% from its prior view of $6.45 to $6.55. The consensus adjusted EPS came in at $6.48.
On October 28, Citi analyst Ashwin Shirvaikar maintained a Buy recommendation on Fiserv, Inc. (NASDAQ:FISV) but trimmed the firm’s price target on the shares to $115 from $122 following the “mixed” third quarter.
According to Insider Monkey’s Q3 data, Fiserv, Inc. (NASDAQ:FISV) was part of 59 hedge fund portfolios, with collective stakes worth approximately $4 billion. Harris Associates held the leading stake in the company, consisting of 21.3 million shares worth $2 billion.
“While our list of potential candidates is filling up, we are being patient. We added two new positions in Q3: Fiserv, Inc. (NASDAQ:FISV) and Heineken. Fiserv is a provider of financial technology, core processing and payment processing services to financial institutions and merchants. The company reports three segments: acceptance (merchant acquiring), payments & networks (issuer processing and debit network), and fintech (core bank processing). Fiserv has strong market positions and scale across these businesses, but competitive intensity varies. In the acceptance segment, Fiserv owns Clover, a high-growth point-of-sale (POS) system forsmall and medium businesses, with similar annualized gross payment volume to Block’s Square. However, Fiserv is receiving little credit for Clover. The market is overly concerned about the competitive nature of merchant acquiring and legacy processors losing market share to new entrants. We believe Fiserv’s business is more resilient and will continue to grow in the medium term driven by its scale and Clover. Moreover, fintech and payments are good businesses that are undervalued by the market. Both businesses are in highly consolidated industries where scale advantages are critical, and revenues are sticky due to high switching costs. A high share of recurring revenue and profit, an attractive margin profile and high free cash flow conversion are characteristics that should provide downside protection, in our view. We started our position with shares selling for about 11X normalized operating profit. That is a below-average multiple for an above-average business.”
7. Fidelity National Information Services, Inc. (NYSE:FIS)
Number of Hedge Fund Holders: 60
Fidelity National Information Services, Inc. (NYSE:FIS) is a Florida-based company that provides technology solutions for merchants, banks, and capital markets firms worldwide. It operates through Merchant Solutions, Banking Solutions, and Capital Market Solutions segments. On October 20, Fidelity National Information Services, Inc. (NYSE:FIS) declared a $0.47 per share quarterly dividend, in line with previous. The dividend is payable on December 23, to shareholders of record on December 9.
On November 25, Mizuho analyst Dan Dolev maintained a Buy recommendation on Fidelity National Information Services, Inc. (NYSE:FIS) but trimmed the price target on the shares to $90 from $105. The company’s Q3 results were disappointing, but management’s focus on cost-cutting can help improve sentiment, the analyst told investors in a research note.
According to Insider Monkey’s data, 60 hedge funds were bullish on Fidelity National Information Services, Inc. (NYSE:FIS) at the end of Q3 2022, compared to 67 funds in the prior quarter. Select Equity Group is the leading position holder in the company, with 5.8 million shares worth $443.5 million.
“We also sold out of payments and financial software maker Fidelity National Information Services, Inc. (NYSE:FIS), choosing to concentrate our digital payments exposure in PayPal (PYPL), which we believe has a more attractive risk/reward at these levels and more internal levers to generate returns. We bought FIS in 2019 for its mix of offense and defense with banking software and services as a stable business and payments that could keep up with fintech. The shares outperformed the benchmark up to the sale, illustrating the resiliency of the core business; however, FIS has underperformed higher-growth payment names.”
6. American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 68
American Express Company (NYSE:AXP) is a New York-based company that provides charge and credit payment card products worldwide. American Express Company (NYSE:AXP) is one of the leading digital money stocks to invest in. On November 21, UBS analyst Erika Najarian initiated coverage of American Express Company (NYSE:AXP) with a Neutral rating and a $168 price target as part of a broader research note on U.S. Consumer & Specialty Finance names.
According to Insider Monkey’s third quarter database, 68 hedge funds reported owning stakes worth $24.8 billion in American Express Company (NYSE:AXP), compared to 67 funds in the prior quarter worth $25.2 billion. Warren Buffett’s Berkshire Hathaway is the biggest position holder in the company, with 151.6 million shares valued at $20.45 billion.
In addition to Visa Inc. (NYSE:V), Mastercard Incorporated (NYSE:MA), and PayPal Holdings, Inc. (NASDAQ:PYPL), American Express Company (NYSE:AXP) is one of the best digital money stocks favored by smart investors.
“In financials, American Express Company (NYSE:AXP) has done an excellent job demonstrating the resiliency of its franchise in the midst of a global pandemic that drove a 60% decline in its core travel and entertainment business. The company’s spend-centric model has been helped by fiscal stimulus ensuring a flush consumer, while management continues to execute well by adding millions of new consumer and small and medium business accounts, which should benefit the franchise over the medium to long term. We remain optimistic regarding the company’s prospects as travel and entertainment activity rebounds, adding to our position in the quarter.”
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Disclosure: None. 11 Best Digital Payments Stocks To Buy Now is originally published on Insider Monkey.