The stock rallied through its $38 offering price during Tuesday’s trading session and is certainly one of the most hyped IPOs of the year. But it's a bit difficult to assess whether or not the low-moat company is the real deal.
While it’s safe to say that Robinhood has transformed the investing landscape given its commission-free brokerage model, justifying the company’s valuation at more than $38 billion isn't exactly straightforward.
On one hand, the fact that Robinhood’s user base is growing quickly and that the company has a finger on the pulse of younger generations who are interested in financial markets is certainly appealing.
On the other, the company has been mired in controversy for its payment-for-order-flow business model and has to face several regulatory issues in the future that could weigh heavy on shares.
The fintech company’s debut highlights the difficulty of adding shares of a company shortly after it goes public, which means it might make more sense to wait until this stock has more trading history to go off of if you are looking to add shares for the long term.
The truth is that there are far better options in the fintech space for investors that are interested in companies at the forefront of innovation in finance.
That’s why it makes sense to take a look at more established fintech companies that offer similar upside to Robinhood without the extra noise.
Here are two fintech stocks with stories that investors can get behind:
Square (SQ) - Get Square, Inc. Class A Report threw investors a curveball this week by announcing its second-quarter earnings on Sunday afternoon along with news that it will be acquiring Australian fintech company Afterpay in a $29 billion all-stock transaction.
The strategic move is a statement of intent from one of the most exciting companies in fintech and adds a “buy now, pay later” service to Square’s growing product portfolio.
While Square is certainly paying up for Afterpay, it’s hard to argue against a move that could accelerate growth and attract younger generations to the company’s fintech ecosystem.
What’s so intriguing about Afterpay and companies like it is that they offer the benefits of a credit card without all of the treacherous downsides like high interest rates and debt.
Afterpay should integrate nicely with Square’s widely successful Cash App product offering, which delivered $546 million in second-quarter gross profit, up 94% year over year.
Combine that with the company’s iconic hardware and software products that help businesses accept card and online payments along with the company’s exposure to cryptocurrency and you have the makings of a fintech giant.
Investors should also be intrigued by Square’s banking products that were announced last month, which includes fee-free checking and savings accounts intended to help small businesses manage their finances all within the company’s convenient payments ecosystem.
This is big since it could help Square to take meaningful market share away from traditional banks and become the premier financial services option for small business owners across the country.
The bottom line here is that Square is an innovative fintech stock with impressive earnings growth, a steady stream of savvy acquisitions and products that support small businesses, which is why it’s a top pick in the space.
With the stock trading right at its 200-day moving average, adding shares of the Latin American e-commerce and fintech powerhouse at this time might pay off in a big way.
It’s a company with essentially four different attractive businesses in one that is poised to take full advantage of the growth of the e-commerce and digital payments industries in Latin American countries like Brazil, Argentina and Mexico.
The MercadoLibre online marketplace is essentially the No. 1 e-commerce platform in Latin America, while the company also offers advertising, logistics, and financing services to its customers.
There’s a lot to like about each component of this company’s e-commerce ecosystem, but let’s focus on the company’s fintech solutions.
If you’ve ever visited Latin America, you probably recognize instantly the opportunity for a company that can offer safe and reliable digital payment solutions since cash is still king there and used for the majority of transactions in the region.
That’s what’s exciting about the company’s fintech segment MercadoPago, which includes a digital payments processing platform, a mobile wallet platform, credit solutions and asset management offerings.
The company’s total payment volume through MercadoPago hit $14.7 billion in the first quarter, up 81.8% year over year, which confirms that this company’s offering has plenty of momentum.
When you stop to consider trends in Latin America like growing smartphone and internet penetration along with the rise of the global e-commerce industry, it’s hard to argue against the upside here.
The company will report second-quarter earnings this week and is certainly a great fintech stock to consider owning for the long-term, especially if you are interested in exposure to emerging markets.