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Home›Nasdaq›Fintech could lead to a disruptive growth rebound

Fintech could lead to a disruptive growth rebound

By Maureen Bellinger
April 11, 2022
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FTech stocks and exchange-traded funds, like other assets with the disruptive growth label, are slumping this year, but some analysts remain constructive on next-generation financial stocks.

If this positive attitude was worth adopting, investors are considering the ARK Fintech Innovation ETF (NYSEARCA: ARKF) could be rewarded.

Last week, Wells Fargo analyst Jeff Cantwell launched coverage of 14 fintech stocks, including some components of ARKF, with “outperform” ratings on all of those names. The analyst sees five themes driving fintech growth. These include digital payments, “the cloud-based as-a-service model for account processing, fraud protection, e-wallets and other services; consolidation and the emergence of cryptocurrency “, reports Eric Savitz for Barron’s.

Among the fintech stocks Cantwell is bullish on are Block (NYSE:SQ) and Shopify (NYSE:SHOP). They are ARKF’s largest and third-largest holdings, respectively, accounting for almost 21% of the list of actively managed ETFs.

The analyst also likes Dutch fintech Adyen (ADYEN), which accounts for almost 4% of ARKF’s list. Cantwell also has an outperform rating on Bill.com (BILL). This is ARKF 15and– the most important component with a weight of almost 2.27%. Toast (TOST), which makes up nearly 2% of the ARKF list, is also rated an “outperformer” by the Wells Fargo analyst. Cantwell adds that there is huge potential for revenue growth in the fintech space.

“The group can collectively increase its revenues by 33% this year and 26% in 2023, a two-year average of around 30%, almost three percentage points more than in 2019. It can increase its profits by 15% this year and 17% the next, beating the S&P500‘s expects 8% this year, 11% next,” according to Barron’s.

Adding to the case of ARKF, amid the aforementioned slump in disruptive growth stocks this year, some corners of the space are inexpensive. This rarely happens, but it does today when it comes to fintech names.

“Low valuations enhance attractiveness. The group is trading at around 5.5 times sales for the next 12 months and 16 times earnings; multiples have compressed significantly over the past six months. The group is trading at a discount to expected 2022 earnings of 20 times the S&P 500 and 2023 expected 18 times, it adds. But this cut won’t last forever, he (Cantwell) says, so investors should grab them now,” Barron’s notes.

For more news, insights and strategy, visit the Disruptive Technology Channel.

Learn more at ETFtrends.com.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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