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In this article, we discuss the 10 fintech stocks Redditors are buying. If you want to skip our detailed analysis of these stocks, go directly to the 5 Fintech Stocks Redditors are Buying.
Financial technology companies have outperformed the wider banking sector in the past few years, registering growth numbers that have left even market experts stunned. According to a report by professional services company Deloitte, the global fintech market was valued at over $108 billion in 2018 and is expected to increase in value to more than $222 billion by 2024. The Asia-Pacific and the Americas are at the front of this boom, holding 40% of the global market share each. The Europe, Middle East, and Africa region accounts for the remaining 20%.
Retail investors, who have taken the stock market by storm since the pandemic, are increasingly predisposed to investing in disruptive technologies. These investors have helped push the valuations of fintech firms to record highs. However, the organic growth of the industry is also noteworthy. Deloitte estimates that the digital payments market has grown to command over 80% of the total revenues in the fintech universe. This growth has been made possible by the rapid digitalization of the world in the past few months.
Reddit forums, where retail investors gather to share stock ideas, are an important tool for stock monitoring these days. Some of the top fintech stocks that Redditors are buying include PayPal Holdings, Inc. (NASDAQ: PYPL), Sea Limited (NYSE: SE), Square, Inc. (NYSE: SQ), and Fiserv, Inc. (NASDAQ: FISV), among others discussed in detail below. There is little doubt that the rise of fintech and cryptocurrencies have transformed the world of finance, with traditional power players struggling for relevance in a rapidly evolving space.
The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this context in mind, here is our list of the 10 fintech stocks Redditors are buying. They were picked keeping in mind the hype around the companies on Reddit forums like WallStreetBets.
The hedge fund sentiment around the stocks was gauged using data of 873 hedge funds tracked by Insider Monkey. The list is compiled according to the number of hedge fund holders in each stock.
The analyst ratings of the companies and their basic business fundamentals are also discussed to provide readers with some more context for their investment decisions.
Fintech Stocks Redditors are Buying
10. Mogo Inc. (NASDAQ: MOGO)
Number of Hedge Fund Holders: 7
Mogo Inc. (NASDAQ: MOGO) is placed tenth on our list of 10 fintech stocks Redditors are buying. The company offers financial technology services and is headquartered in Canada.
On June 15, investment advisory BTIG initiated coverage of Mogo Inc. (NASDAQ: MOGO) stock with a Buy rating and a price target of $13, noting that the firm offered an attractive means for investors to gain exposure to the financial services industry and cryptocurrencies.
Out of the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Point72 Asset Management is a leading shareholder in Mogo Inc. (NASDAQ: MOGO) with 1.8 million shares worth more than $14 million.
Just like PayPal Holdings, Inc. (NASDAQ: PYPL), Sea Limited (NYSE: SE), Square, Inc. (NYSE: SQ), and Fiserv, Inc. (NASDAQ: FISV), Mogo Inc. (NASDAQ: MOGO) is one of the trending fintech stocks on Reddit.
9. Upstart Holdings, Inc. (NASDAQ: UPST)
Number of Hedge Fund Holders: 21
Upstart Holdings, Inc. (NASDAQ: UPST) is ranked ninth on our list of 10 fintech stocks Redditors are buying. The firm operates a cloud-based artificial intelligence lending platform and is headquartered in California.
On September 8, investment advisory Piper Sandler maintained an Overweight rating on Upstart Holdings, Inc. (NASDAQ: UPST) stock and raised the price target to $300 from $191, predicting that the consumer loan department of the firm would continue outperforming.
At the end of the second quarter of 2021, 21 hedge funds in the database of Insider Monkey held stakes worth $2.1 billion in Upstart Holdings, Inc. (NASDAQ: UPST), up from 13 the preceding quarter worth $1.7 billion.
Alongside PayPal Holdings, Inc. (NASDAQ: PYPL), Sea Limited (NYSE: SE), Square, Inc. (NYSE: SQ), and Fiserv, Inc. (NASDAQ: FISV), Upstart Holdings, Inc. (NASDAQ: UPST) is one of the stocks gaining the attention of investors on Reddit.
“During the quarter, we purchased Upstart Holdings Inc. Upstart is an artificial intelligence (AI) and cloud-based lending platform. The company uses AI models to underwrite superior loans with lower interest rates, lower default rates, higher approval rates, and increased underwriting automation. Consumers can access Upstart-powered loans through its banking partners’ websites; however, most of its loans are underwritten on Upstart.com. Upstart has a fee-based revenue model and retains only a small portion of the loans, while the majority of the loans end up on the balance sheets of its partner banks or are sold into the capital markets. We believe Upstart’s technology is superior to the FICO score, which is ubiquitous within the consumer credit markets. With an excellent product and a large total addressable market, we believe that Upstart’s prospects are bright.”
8. SoFi Technologies, Inc. (NASDAQ: SOFI)
Number of Hedge Fund Holders: 39
SoFi Technologies, Inc. (NASDAQ: SOFI) is a California-based company that owns and runs an online finance platform. It is placed eighth on our list of 10 fintech stocks Redditors are buying.
On June 15, investment advisory Rosenblatt initiated coverage of SoFi Technologies, Inc. (NASDAQ: SOFI) stock with a Buy rating and a price target of $30, noting that the firm had a “powerful cost advantage” over legacy banks.
At the end of the second quarter of 2021, 39 hedge funds in the database of Insider Monkey held stakes worth $1.7 billion in SoFi Technologies, Inc. (NASDAQ: SOFI).
In addition to PayPal Holdings, Inc. (NASDAQ: PYPL), Sea Limited (NYSE: SE), Square, Inc. (NYSE: SQ), and Fiserv, Inc. (NASDAQ: FISV), SoFi Technologies, Inc. (NASDAQ: SOFI) is one of the best fintech stocks according to Reddit.
“We invested in SoFi Technologies, Inc., an online consumer finance company or “neobank,” through a SPAC-PIPE transaction. The company was founded in 2011 to refinance student loans into lower interest rates and has since expanded into other financial services, such as bank accounts, debit and credit cards, brokerage, and cryptocurrency trading. We believe that SoFi now has the broadest product suite of any neobank in the U.S., and we view the core lending segment as a differentiated product line that few other neobanks offer. With most competitors targeting un-banked and under-banked individuals, we believe SoFi’s focus on a higher-income demographic coupled with its wide range of products positions it to be one of the leading digital banks. The company’s product breadth enables it to serve customers throughout their lives, such as offering student loan refinancing for new graduates or brokerage accounts when those graduates accumulate savings. SoFi seeks to cross-sell products to existing customers, driving higher customer engagement and retention. SoFi also owns a technology platform called Galileo that is used to power many other neobanks. We believe Galileo gives SoFi attractive exposure to the broader universe of fast-growing consumer FinTech companies. Over time, we expect SoFi to continue adding members and cross-selling additional services, which should drive improving unit economics and earnings growth.”
7. Payoneer Global Inc. (NASDAQ: PAYO)
Number of Hedge Fund Holders: 40
Payoneer Global Inc. (NASDAQ: PAYO) is a New York-based firm that runs a cross-border payments and commerce platform. It is ranked seventh on our list of 10 fintech stocks Redditors are buying.
On July 28, investment advisory Cantor Fitzgerald initiated coverage of Payoneer Global Inc. (NASDAQ: PAYO) stock with an Overweight rating and a price target of $13, highlighting that it expected the firm to expand revenue by upto 30% annually in the coming years.
At the end of the second quarter of 2021, 40 hedge funds in the database of Insider Monkey held stakes worth $363 million in Payoneer Global Inc. (NASDAQ: PAYO).
PayPal Holdings, Inc. (NASDAQ: PYPL), Sea Limited (NYSE: SE), Square, Inc. (NYSE: SQ), and Fiserv, Inc. (NASDAQ: FISV) are some of the top fintech stocks according to Reddit, along with Payoneer Global Inc. (NASDAQ: PAYO).
6. StoneCo Ltd. (NASDAQ: STNE)
Number of Hedge Fund Holders: 44
StoneCo Ltd. (NASDAQ: STNE) is placed sixth on our list of 10 fintech stocks Redditors are buying. The company provides financial technology services and is headquartered in the Cayman Islands.
On June 23, investment advisory New Street initiated coverage of StoneCo Ltd. (NASDAQ: STNE) stock with a Neutral rating and a price target of $82, noting that the value of the firm lied in bricks and mortar acquiring and prepayments.
At the end of the second quarter of 2021, 44 hedge funds in the database of Insider Monkey held stakes worth $2.7 billion in StoneCo Ltd. (NASDAQ: STNE), up from 39 in the previous quarter worth $2.1 billion.
PayPal Holdings, Inc. (NASDAQ: PYPL), Sea Limited (NYSE: SE), Square, Inc. (NYSE: SQ), and Fiserv, Inc. (NASDAQ: FISV) are trending on Reddit, just like StoneCo Ltd. (NASDAQ: STNE).
“StoneCo (NYSE: STNE) has been in our portfolio since early 2019 and has appreciated 225% since. In the first half of 2021 the stock was down nearly 20% and was a drag on the fund’s performance.
Stone is a leading fintec company in Brazil that provides back-office software, loans and other financial services to small and medium sized businesses (SMBs). We have discussed Stone in past letters and the company’s “ladder up” from a card processor to a supplier of enterprise software used to sell financial products on top of such as working capital loans.
The company generates a lot of cash that it reinvests to acquire or build new financial products for its customer base. Since we invested, the company has grown the number of SMB clients by 3x, revenue by 2.3x, and net income by 2.2×11.
The pandemic’s impact on SMBs in Brazil has been severe, especially for the many retailers who are only now adopting an e-commerce strategy. In the first half of 2021 Stone increased loss provisions on its lending product, and overall growth has slowed somewhat. The stock’s decline earlier this year was not surprising, but investors are now ignoring progress that has enhanced Stone’s position for coming out much stronger when the recovery begins.
StoneCo Q1 2021 Earnings Call: “Based on (i) our learnings with lockdowns last year, (ii) recent client transactional data and (iii) learnings from the dynamics of countries where vaccines are widespread, we expect that once vaccination scale (which we think will happen in the second half of 2021), the economic recovery will be fast and – although delayed – Brazil is moving in the right direction. For these reasons, we have made an informed decision to be ready for recovery by investing in growth…”
“…In the first quarter, we decided to increase our salesforce headcount by 24%, marketing investments by 33%, customer service and logistics headcount by 32% and technology headcount by 20% in order to be the fastest player when our economy comes back to normal levels.”
“I want to start our presentation by highlighting that Brazil went through a second wave of COVID in the first quarter of ’21, which imposed commerce restrictions in several cities throughout the country. Those restrictions were felt by our clients with average TVP reaching a low in the end of March…
…But similar to the behavior we saw in the comeback from the first lockdown in 2020, we already observed significant and quick recovery with average TPV in May achieving levels above January 2021. As Thiago mentioned, we expect that once vaccinations are scaled, the economy recovery of the country will be fast.”
In terms of COVID recovery opportunities within our portfolio, Stone might be the most “coiled” because the impact on Brazilian small businesses has been so traumatic. In addition, Stone is part of a much larger and fast-moving transition happening in Brazil around the digitalization of financial services. The speed of this transition is unique to Brazil because the Central Bank is actively trying to reduce the country’s previous dependency on a small handful of large banks. Important progress in the first half of 2021 included closing on the long-awaited acquisition of Linx, a mature provider of enterprise software with a large footprint across Brazil. The acquisition will provide Stone meaningful cross-selling opportunities and a more diversified customer base.”
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Disclosure. None. 10 Fintech Stocks Redditors are Buying is originally published on Insider Monkey.