The fintech bubble may have burst as valuations in the tech scene fell back to Earth over the past year. With a recession on the horizon and higher interest rates likely to curb innovation spending, the road ahead seems extremely bumpy for the many ambitious fintech startups that strived to change the world. Instead, let’s use TipRanks’ Comparison Tool to evaluate three blue-chip behemoths that could take the fintech world by storm amid rising rates. Based on upside potential alone, MA stock looks the most promising.
Fintech hype got a bit ahead of itself last year, with firms like Block (NYSE: SQ) more than tripling since the start of the pandemic to its peak, only to crumble to depths not seen since the 2020 coronavirus crash. Though interest in investing in fintech may have dried up, I think the longer-term opportunity at hand is still in play.
In a post-2021 world with high interest rates, it’s not the disruptive fintech startup that could take the financial world by storm. It’s likely the well-established firms in the technology and financial industries. Indeed, various tech titans like Apple (NASDAQ: AAPL) have embraced finance and payments, with a slew of new services introduced over the past few years. Meanwhile, credit card behemoths like Visa (NYSE: V) and Mastercard (NYSE: MA) have also led the charge in fintech innovation.
With gushing cash flows and brilliant managers who know how to capture market share, it’s the established blue chips that may be the new “hot” fintech stocks to own from here. As for the unprofitable fintech startups, many could struggle to cope with the harsher macro climate. Credit is about to get hard, and with a lack of profits, it could be challenging to stay on the cutting edge of financial innovation.
Now, without further ado, let’s dive further into V, MA, and AAPL.
Visa (V)
Visa is a credit card company that we’re all familiar with. It has a massive network that’s proven tough to replicate. Despite recent headwinds, Visa’s payments have held up far better than most would think. Visa’s third-quarter numbers were much better than expected, with per-share earnings of $1.98, ahead of the $1.75 consensus estimate.
With a recession on the horizon, credit card payments could take a turn for the worst. Visa has been through recessions before, and they’ve been quite painful. Despite the headwinds, Visa looks poised to continue its growth. The company won’t be sitting back, cutting away at costs, just hoping for the economic tides to turn. The company will be very busy enhancing its growth prospects as its smaller fintech peers crumble.
If anything, a recession may help Visa gain strides and market share in the payments scene. Now, Visa is already the payments leader. However, it can still claw back business from the BNPL (Buy Now Pay Later) firms that have since gone bust.
Visa has the network and an ever-increasing number of perks to beckon young consumers back to its ecosystem. Undoubtedly, Visa may have been seen as vulnerable to the rise of fintech firms in 2021. Now, it’s Visa that looks far better than its peers, now that investors are re-focused on real profits and fundamentals and less on overly-ambitious growth stories.
What is the Price Target for V Stock?
Wall Street remains upbeat on Visa, with a “Strong Buy” consensus. The average V stock price target is $253.62, implying 40.4% upside potential. As fintech startups sink further with every rate hike, Visa stands to become that much more dominant in payments.
Mastercard (MA)
Mastercard is another credit card company that’s embraced technology over the years. In prior pieces, I praised the company for its growth strategy outlined at its 2021 Investor Day meeting. Management is looking to invest big bucks in commerce, society, and technology. Investments in commerce appear to be investments in present-day fundamentals, while tech investments could be endeavors that beef up the firm’s long-term share-taking capabilities.
Indeed, Mastercard’s smaller fintech rivals have shown promise with their innovative capabilities. With rates rising, the case for owning such firms has lowered. Arguably, Mastercard has better innovative capabilities than the many “disruptive” fintech up-and-comers. Mastercard isn’t just capable of disrupting its small “disruptors,” but it’s also able to leverage its massive network to kickstart growth in fintech innovations that a smaller competitor just cannot do.
At this juncture, Mastercard stands out as one of the better fintech plays for today’s high-rate world. Even if rates come down in a few years, Mastercard may have already pulled far too ahead of the competition – if it hasn’t already.
What is the Price Target for MA Stock?
For now, Mastercard is bracing for a downturn. Despite the tough road ahead, Wall Street continues to praise the stock, with a “Strong Buy” rating and with the average MA price target of $413.60 implying 42.6% upside potential.
Apple (AAPL)
Apple is a tech behemoth that’s stealthily moved into the payment services space in recent years. The company’s Apple Wallet and Apple Pay services have been embraced by its many consumers locked into its walled garden.
Though fintech services represent a relatively small slice of the overall revenue pie, Apple could be on the cusp of considerable share-taking in the payments space. The firm’s “Pay in Four” installments business could easily pressure BNPL firms to their breaking point amid rising interest rates.
Further, Apple’s “Tap to Pay” service could give it a huge growth runway in the point-of-sale (PoS) marketplace. Indeed, Apple seems to be going for digital and physical payments. With such a massive network of users at its side, Apple seems poised to become a fintech behemoth that’s difficult to stack up against.
Apple’s a disruptor at heart, and with rates on the rise, the company is in a great position to accelerate growth in the realm of fintech with its massive $48.2 billion cash hoard.
What is the Price Target for AAPL Stock?
Wall Street loves Apple, even in this bear market. The stock commands a “Strong Buy” consensus rating, with the average AAPL stock price target of $183.45 implying 21.7% upside potential.
Conclusion: An Opportunity in Fintech Awaits
The fintech bubble may have burst, but the long-term opportunity in the space is still up for grabs. As a recession and higher rates weigh heavily on smaller, less-profitable (or unprofitable) companies, I expect that blue-chip behemoths like Visa, Mastercard, and Apple will be ready to take share and make the most of the longer-lived fintech boom.
