Fintech stocks have continued trading sideways since the selloffs in late 2021 and currently offer some of the best entry points in the market. Most growth stocks have rebounded substantially this year, and fintech is among the only sectors that are still behind. I believe they will follow suit and rally in the coming months, so smart investors will keep an eye out for the best bargain fintech stocks in June.
First, let’s address the elephant in the room: why are fintech stocks depressed in the first place? I believe the main reason is that they are returning to a more sustainable growth trajectory after the post-pandemic boom in e-commerce and online sales.
However, I do not believe this reflects the long-term potential of fintech stocks. I believe interest rates will reach a peak in June, or next month at the latest. Fintech stocks are still trading below their pre-pandemic levels, and now is a great opportunity for investors to snap up some bargain fintech names.
Here are three bargain fintech stocks that I think are worth buying in June:
PayPal (NASDAQ:PYPL) is one of the best growth stocks you can buy right now. The value here is very compelling when you realize that the stock is half what it was worth back in Q4 2019 with 41% more sales ($4.96 billion in Q4 2019 vs. $7 billion in Q1 2023) and better bottom-line metrics. The only lower number is its sales growth. But again, this does not justify such a 50% discount compared to its 2019 prices when you consider that growth was ~15-18% per quarter and even reached 11.6% in Q2 2019. That’s not too far from its 8.6% growth in Q3; not nearly enough to justify its current prices.
Furthermore, share dilution isn’t a problem here, either. In fact, PayPal has been buying back shares rapidly, and quarterly shares outstanding declined by 3.24% YOY in Q1.
With all that in mind, PayPal is a buy hand over fist. I’m confident that PYPL will deliver multibagger gains in the next few years. Analysts also suggest a 56.2% upside potential by next year, while Gurufocus‘ model suggests PYPL could hit >$300 by 2026.
Block (NYSE:SQ) suffers from the same problem that PayPal does, and there is not much to add except that it has significant growth headroom and potential. However, I do believe that PYPL is a better buy due to profitability, and SQ may not perform as well if the economy rattles again.
Nonetheless, the downside potential here is very limited. SQ trades more than 27% below its pre-pandemic price, and analyst price targets imply a 48.7% upside potential here by next year.
I believe higher gains are possible as there is nothing intrinsically bad about the company or its long-term growth prospects. Block’s revenue growth accelerated to 27% YOY in Q1, and EBITDA was up almost 90% YOY. It also boosted EBITDA guidance in its latest report, and I see no reason why SQ isn’t a strong buy at this range.
I mentioned Upstart (NASDAQ:UPST) in an article at the end of March this year, and it was changing hands at half its price back then. I noted that the company had little bankruptcy risk and that the business model could thrive once it survives this market cycle.
Indeed, the pressures the company has been facing are mostly external due to banks becoming more conservative. It has a lending model that is superior to what banks traditionally use, and its problems are linked to the broader economy. I believe Upstart still has much more upside potential left in the long run and can deliver substantial gains once banks feel comfortable lending using its AI model.
Still, I would caution that a near-term correction is likely. Once the price dips below $20 again, I recommend snapping up more UPST.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.