Investor fears about the Federal Reserve’s aggressive monetary policy tightening to rein in soaring inflation, the possibility of a recession, rising energy and commodity prices, and continued market disruptions supply kept the stock market under pressure. The market sell-off has not spared fintech stocks, and many have pulled back significantly.
The fintech industry has become extremely popular as it has helped improve payment processing, insurance, lending, wealth management, and more. Fintech companies have facilitated access to easy credit, money management and simple payments. However, growing data security issues are plaguing the industry. With the increase in cyberattacks, consumers are wary of fintech solutions. According to FS-ISAC’s Navigating Cyber 2022 report, third-party risks, zero-day vulnerabilities and ransomware clusters are likely to adapt to the changing cyber environment and continue to increase in 2022.
In addition to concerns surrounding cyberattacks, growing competition in the fintech space could keep fundamentally weak stocks under pressure. We think it might be a good idea to avoid fundamentally weak fintech stocks Bill.com Holdings, Inc. (INVOICE), Block, Inc. (SQ) and Futu Holdings Limited (FUTURE).
Bill.com Holdings, Inc. (INVOICE)
BILL is a leading provider of cloud-based software that simplifies, digitizes and automates back-office financial processes for small and medium businesses. It provides an AI-enabled financial software platform that creates seamless connections between users, suppliers, and customers.
Non-GAAP BILL operating loss increased 166.5% year-over-year to $5.67 million for the third quarter ended March 31, 2022. The company’s non-GAAP net loss increased 398.3% from year-over-year to $8.68 million. Additionally, its non-GAAP loss per share rose 300% year over year to $0.08.
Analysts expect BILL’s EPS for fiscal 2022 and 2023 to remain negative. Over the past nine months, the stock has lost 56.3% to close the last trading session at $128.04.
BILL’s weak fundamentals are reflected in its POWR Rankings. The stock has an overall F rating, which equates to a strong sell in our proprietary rating system. POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an F rating for value and stability and a D for quality. It is ranked No. 140 out of 155 stocks in the F-rated Software app industry. Click here to see BILL’s other ratings for growth, momentum and sentiment.
Block, Inc. (SQ)
SQ is a technology company that creates tools for sellers to accept card payments and provide next-day reporting, analytics, and settlement. The company focuses on financial services. Also, its building block includes Square, Cash App, Spiral, TIDAL, and TBD54566975.
For the fiscal first quarter ended March 31, 2022, SQ’s total net revenue decreased 21.6% year-over-year to $3.96 billion. The company’s net loss attributable to common shareholders was $204.19 million, compared to net profit of $39 million in the same period last year. Additionally, its loss per share was $0.38, compared to EPS of $0.08 a year ago.
For the quarter ending June 30, 2022, SQ’s EPS is expected to decline 72.7% year-over-year to $0.18. Over the past nine months, the stock has lost 69.5% to close the last trading session at $76.58.
The SQ’s POWR ratings are consistent with this bleak outlook. It has an overall F rating, which translates to a strong sell in our proprietary rating system.
It has an F rating for stability and sentiment and a D for growth. In category D Financial Services (Corporate) industry, it is ranked No. 101 out of 107 stocks. To see SQ’s other ratings for Value, Momentum and Quality, Click here.
Futu Holdings Limited (FUTURE)
Hong Kong-based FUTU is an investment holding company offering digitized brokerage platforms. The company provides investment services through its digital brokerage platform, Futu NiuNiu. Its service offerings include trade executions and margin financings, which allow its clients to trade securities in markets such as stocks, warrants, options and exchange-traded funds (ETFs).
FUTU’s total revenue decreased 25.6% year-on-year to HK$1.64 billion ($208.95 million) for the first quarter ended March 31, 2022. The company’s gross profit decreased up 19.8% year-on-year to HK$1.41 billion ($179.65 million). Additionally, its non-GAAP adjusted revenue fell 47.2% year-over-year to HK$622.22 million ($79.27 million).
Analysts expect FUTU’s FY2022 EPS and revenue to decline 7.2% and 5.8% year-on-year to $2.26 million and $856 million, respectively. Over the past year, the stock has lost 69% to close the last trading session at $45.15.
FUTU’s weak outlook is reflected in its POWR ratings. It has an overall D rating, which equates to a sell in our rating system.
It has an F rating for stability and a D for growth and value. It is ranked last out of 12 stocks in the F rating Financial market places industry. Click here to see other FUTU ratings for Momentum, Sentiment and Quality.
BILL stock closed at $117.85 on Friday, down -$10.19 (-7.96%). Year-to-date, BILL is down -52.70%, compared to a -17.67% rise in the benchmark S&P 500 over the same period.
About the Author: Dipanjan Banchur
Ever since he was in elementary school, Dipanjan had been interested in the stock market. This enabled him to obtain a master’s degree in finance and accounting. Currently, as an investment analyst and financial journalist, Dipanjan is particularly interested in reading and analyzing emerging trends in financial markets. After…