On Wall Street, “strength begets strength.” Despite the recent market correction and the volatility caused by the “Yen Carry Trade” unwind, the fintech and payments group has exhibited stellar relative strength recently. Over the past three months, PayPal (PYPL), Affirm (AFRM), and Upstart (UPST) have each outperformed the S&P 500 Index ETF (SPY) dramatically, gaining 15.5%, 26.4%, and 83.5% (compared to the SPY’s 6.7%).
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The “buy now, pay later” (BNPL) segment of the market is uniquely positioned to do well in the current economic environment due to upcoming interest rate cuts (which will reduce costs) and a consumer who is strapped for cash.
Affirm (AFRM) Beats Earnings as BNPL Gains Momentum
Last night, AFRM beat earnings on the top and bottom lines. AFRM reported EPS of $-0.14, which handily beat Zacks Consensus Estimates of $-0.45.
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The news driving the stock today is that the company raised FY25 guidance and expects to achieve GAAP profitability in fiscal Q4 of 2025. Early Tuesday, shares were higher by a healthy 20%. However, the price explosion may just be the start as shares break out of a long price channel.
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Another interesting tidbit from AFRM’s investor presentation last night is that more than 20% of its gross merchandise value (GMV) for its BNPL services are coming from areas the company historically did not address, such as wholesale clubs like Costco (COST) and home improvement stores like Home Depot (HD).
Upstart Holdings (UPST): An AI-Based Lender
A recent study conducted by the Federal Reserve Bank of Philadelphia indicated that some 33% of Americans earnings six-figure incomes are concerned about meeting their financial obligations. Since the average American does not earn six figures, this is cause for concern.
UPST is a leading cloud-based lender powered by artificial intelligence (AI) and machine learning. The company’s unique algorithms allow it to lend to a wider range of people, while still properly assessing credit risk. Shares exploded by some 40% earlier this month after the company reported better-than-expected EPS. Meanwhile, several Wall Street analysts tracked by Zacks Investment Research have warmed up on the stock and revised their EPS estimates higher for the coming quarters.
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PayPal’s (PYPL) Venmo Drives Earnings
PayPal is an established player in the industry and is one of the largest online payment solutions providers. The company’s peer-to-peer payment service, Venmo, is the key catalyst behind its growth. Venmo allows family and friends to transfer money seamlessly through their mobile devices. However, the real growth is yet to come. Venmo users can now pay at more than two million merchants thanks to partnerships with credit card kingpins Visa (V) and Mastercard (MA).
PYPL shares are responding to the anticipated growth by breaking out of a base structure after a long slumber. Finally, a historically low valuation adds to the bullish picture.
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Conclusion
New economy fintech and payment stocks exhibit strong growth and bullish prospects. Affirm’s bullish earnings report last night should bolster this market segment further into 2025.
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Mastercard Incorporated (MA) : Free Stock Analysis Report
Visa Inc. (V) : Free Stock Analysis Report
The Home Depot, Inc. (HD) : Free Stock Analysis Report
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
SPDR S&P 500 ETF (SPY): ETF Research Reports
PayPal Holdings, Inc. (PYPL) : Free Stock Analysis Report
Upstart Holdings, Inc. (UPST) : Free Stock Analysis Report
Affirm Holdings, Inc. (AFRM) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
