Three Fantastic Fintech Investment Opportunities Currently Available beneath a Grand for Each Share
Given that money and technology are the driving forces in today's world, it's no surprise that these elements can lead to some of the most profitable investments. Here's a closer examination of three outstanding fintech stocks that you can invest in, even if you only have $1,000 to spare.
Bill.com
While you may not be familiar with Bill.com (BILL -3.03%), there's a high chance your employer is. Bill provides a range of accounting software for various enterprises, from small businesses to large corporations.
Although the market is crowded with established players like QuickBooks, NetSuite, and ZipBooks, Bill stands out due to its specialized software developed specifically for accounts receivable and accounts payable departments, accounting firms, and budget-conscious supervisors. The company monetizes its cloud-based technology through subscription fees and transaction-based charges.
Last quarter's revenue increased by 18% year over year, highlighting the company's prolonged revenue growth.
It's worth noting that Bill's revenue growth is starting to slow down. Its revenue retention rate has also decreased, from over 100% just a few years ago to 92% at the end of fiscal 2024 on June 30. This indicates that some customers are either discontinuing their service or using it less frequently. Economically challenging times may also be forcing small businesses to cut costs wherever possible. Bill should be actively addressing these challenges and sharing its strategies with investors.
Nevertheless, it's important to maintain perspective. Bill's impressive growth during 2022 and 2023 was not sustainable in its current form. Although top-line growth has slowed, profit margins have widened more rapidly due to faster sales growth than expense growth. This shift leads to a higher-margin business, providing Bill with the financial flexibility it needs to navigate these challenges.
At the time of writing, the stock remains expensive according to various indicators. It is also trading slightly above the average price target, which is around $82. These factors could potentially limit the stock's growth.
However, it's worth noting that the stock's current price and analysts' collective pessimism are more reflective of the past than the promising future. As the stock recovers from its significant pullback following its peak in 2021, driven by pandemic-related factors, it is more likely for the market to start pricing in this bright future. Bill's offerings are what many enterprises and businesses have been waiting for a long time.
SoFi Technologies
With consumers increasingly moving their lives online (shopping, work, socializing, etc.), it's no surprise that online banking is growing in popularity.
Although this trend is already well underway, there is still room for further development.
According to the latest data from the American Bankers Association, within the United States, a mobile banking app is the most popular method of managing banking transactions, with 48% of customers using it as their first option. Online banking via a web browser is a distant second at 23%, while in-branch visits and telephone calls are relatively uncommon.
Given this trend, it's no surprise that consumers are turning to digital banking solutions for their financial needs.
Enter SoFi Technologies (SOFI -1.80%).
Originally launched as a platform for managing student loans, SoFi has expanded to offer a variety of financial services such as checking accounts, loans, credit cards, insurance, and investments, all available through a fully digital platform.
SoFi has seen its user base grow rapidly, with 9.4 million customers by the end of September, extending a four-year streak of uninterrupted quarterly user growth from a count of 1.5 million customers in the same period of 2020. Revenue and earnings before interest, taxes, depreciation, and amortization (EBITDA) have also grown at a similar pace as more customers adopt additional products and services. The company recorded a profit for the first time during the first quarter of this year and is expected to continue increasing these profits going forward.
The potential for SoFi Technologies to continue its growth trajectory into the future is significant. Although online banking has already experienced significant growth, only 30% of U.S. consumers currently have an account with an online-only bank. The other 70% are still to be converted. Demand for online banking services is expected to increase as online-only banks continue to gain popularity. Market research firm Straits Research projects that the global online banking market will grow at a rate of nearly 14% per year through 2030, with the North American market leading this growth.
American Express
Lastly, consider adding American Express (AXP 1.82%) to your list of fintech stocks if you have an extra $1,000 to invest.
Although American Express is a well-known brand, it's not just a credit card provider. In 2021, its payment network processed nearly $1.7 trillion worth of transactions and generated $13.5 billion in revenue. There are currently around 140 million American Express cards in circulation.
By investing in American Express, you are gaining exposure to a company that is not only dominant in the credit card market but also offers a wide range of financial services such as travel and entertainment services, merchant services, and lending. American Express has been offering these services for over 165 years and continues to evolve, adapting to the changing needs of its customers.
The stock has shown strong performance, with shares increasing by over 35% in the past year alone, making it a compelling investment opportunity for those looking to gain exposure to the growing financial technology market. American Express is well-positioned to leverage the ongoing trend towards digital transactions and the increasing demand for payment solutions.
American Express stands apart from commonly used credit card networks like Mastercard and Visa in a unique way. It functions not just as a credit card provider, but also as a comprehensive platform for revenue generation through its credit card ecosystem.
Despite numerous credit cards offering incentives, Amex cardholders often enjoy advantages that are hard to match. Offers like hotel stay credits, rebates on grocery purchases, discounted media streaming services, access to airport lounges, and more, make Amex an attractive option for users who are willing to shell out up to $695 annually for its cards. Merchants, too, pay a minor fee each time an Amex card is used at their establishment.
It's worth mentioning that Amex tends to attract a wealthier clientele, who may not feel the impact of economic instability to the same extent as the average consumer. This is one reason for Amex's robust revenue growth, reportedly 14 consecutive quarters, recovering from its downturn caused by the pandemic in a commendable manner.
The future looks promising for Amex as well. Younger generations, including Millennials and Gen Z, are particularly fond of its services, collectively contributing to around a third of its payment volume and a large number of recent cardholders. This age group is already accustomed to membership-based ecosystems, like Amazon Prime and Costco's stores.
As Millennials and Gen Z grow older and Generation Alpha enters adulthood, we can expect an even wider acceptance of paying for Amex's premium benefits.
The financial performance of Bill.com demonstrates its ability to generate revenue growth despite a slowdown and improved profit margins, making it an attractive investment opportunity for those interested in fintech stocks.
American Express' unique credit card ecosystem, attractive offers for cardholders, and a wealthier customer base make it a robust investment option in the growing financial technology market.
