HomeBusiness2 Fintech stocks that are making screaming buys in March

2 Fintech stocks that are making screaming buys in March

The S&P500 is hovering around all-time highs as we head into March, but that doesn’t mean all stocks have become expensive. There are some excellent opportunities for risk-tolerant long-term investors, especially in the financial technology or fintech industry. Here are two companies in particular that seem like incredible buys as winter draws to a close.

A real disruptor with strong results

Lemonade (NYSE:LMND) is an insurance company looking to disrupt the traditional model by using technology to alleviate consumer pain points. For example, claims can be processed in seconds instead of days in many cases, and obtaining (and accepting) insurance quotes is a seamless process.

In the fourth quarter, Lemonade reported surprisingly strong results. It exceeded the upper end of its guidance range for revenue, prevailing premiums and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). The latter shows that losses decrease quite quickly.

Management said it expects cash flow to be positive in 2025 and the company to achieve adjusted EBITDA profitability in 2026. With nearly $1 billion in cash and investments, the company has plenty of scope to get there.

See also  US is investigating Indian billionaire Gautam Adani and his group for possible bribery

Not only did all these numbers look great, but the company’s loss ratio was 77% – one big improvement on the 89% figure from Q4 2022 and just above the long-term target of 75%. (To be fair, the fourth quarter is seasonally strong for insurance profitability.)

Despite the company’s overall excellent results, Lemonade shares fell more than 20% after the report. Not only did management’s earnings guidance come in a bit weaker than what investors had hoped for in 2024, but the company said it is returning to growth mode in 2024 and that higher growth costs could put pressure on profitability.

Still, the company’s numbers are all moving in the right direction. If management can grow the company and meet its earnings targets, this could be a huge win for patient investors.

A deep fintech with a lot of potential

In many ways, PayPal‘S (NASDAQ:PYPL) the recent results have been quite strong. Although the active user base fell 2% year-over-year in the fourth quarter, total payment volume grew 15%, thanks to a focus on engaging the most loyal customers.

See also  Why Micron Technology Stock Soared Monday Morning

The company is terribly profitable and generates approximately $5 billion in free cash flow annually. This goes along with the more than $17 billion in cash on the balance sheet.

PayPal’s shares have fallen in value in recent years as user growth slowed and the company’s future growth strategy was unclear. As a result, PayPal is down about 80% from its 2021 highs.

New CEO Alex Chriss, who took over a few months ago, is already rolling out several artificial intelligence (AI)-based growth initiatives. For the time being, however, it remains to be seen whether he can deliver meaningful revenue and profit growth to the company again.

PayPal is expected to generate $5.10 per share in earnings in 2024, so the stock trades for less than twelve times forward earnings. Long-term investors who add shares while this massive company is in the midst of a strategy change could be richly rewarded.

Buy for the long term

I have no idea what Lemonade and PayPal stock will do in the coming weeks or months. I own stocks in my portfolio because I believe in the long-term growth potential of both companies and I believe that both stocks will be worth significantly more in five to 10 years than they are today. I expect a bit of a rollercoaster ride along the way, but patient and risk-tolerant investors could ultimately be happy that they added these stocks at current levels.

See also  2 'Magnificent Seven' Stocks Making Screaming Buys in March

Should You Invest $1,000 in Lemonade Right Now?

Before you buy shares in Lemonade, consider the following:

The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Lemonade wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.

Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor service has more than tripled the return of the S&P 500 since 2002*.

View the 10 stocks

*Stock Advisor returns February 26, 2024

Matt Frankel has positions in Lemonade and PayPal. The Motley Fool holds and recommends positions in Lemonade and PayPal. The Motley Fool recommends the following options: March 2024 short calls of $67.50 on PayPal. The Motley Fool has a disclosure policy.

2 Fintech Stocks That Are Screaming Buys in March was originally published by The Motley Fool

- Advertisement -
RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Most Popular

Recent Comments