3 Fintech stocks with more potential than any cryptocurrency

by James · July 7, 2022

The cryptocurrency market burned many investors over the past year as rising interest rates drove investors away from more risky investments. Bitcoin (BTC 1.78%) has lost about 70% of its value since reaching its all-time high in November last year, and many of the smaller altcoins have collapsed.

The crypto-meltdown may represent a buying opportunity for counter-investors that can withstand volatility, but most investors should probably avoid that sector and stick to better diversified fintech games. So today I will take a closer look at three promising fintech stocks – Adyen (ADYE.Y 6.45%), MercadoLibre (MELI -1.26%)and Visa (V 0.29%) – and explain why they can be better games than most cryptocurrencies.

A shopper pays in a store with a smartphone.

Image Source: Getty Images.

Table of Contents

1. Adyen

Adyen is a Dutch software company that offers an end-to-end platform for payment processing, data analysis and financial management services. The services can be integrated into existing online, mobile and in-store payment systems with just a few lines of code.

These flexible integrations allow merchants to accept over 250 payment methods, including credit cards, debit cards, mobile wallets and other payment apps. Instead of offering dedicated consumer-facing apps like PayPal or Block‘s Cash App, Adyen’s back-end software enables merchants to launch their own debit cards and mobile wallets. Adyen also does not operate cryptocurrency trading services, stock trading tools or physical debit cards.

Adyen operates quietly behind the scenes, but it grows like a weed. Income and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 46% and 57% respectively in 2021, when there was a rare decline during the pandemic in 2020.

Analysts expect revenue and adjusted EBITDA to increase by a further 35% and 36% this year. The stock is not cheap at 50 times this year’s adjusted EBITDA, but its robust growth and disruptive potential – which drew eBay away from PayPal in 2018 – justifies that premium assessment.

2. MercadoLibre

MercadoLibre is commonly known as the Latin American e-commerce leader. However, the company’s PayPal-like Mercado Pago payment platform – which connects sellers, shoppers and off-site businesses to its ecosystem – also makes it the region’s best fintech company.

This ecosystem also includes its credit-based payment services (Mercado Crédito), online insurance, investment services and cryptocurrency trading tools. It ended the first quarter of 2022 with 35.8 million unique active fintech users, representing a 31% growth from a year earlier, and that ecosystem included 20.2 million mobile wallet users and nearly 23 million investment accounts.

Its total payment volume (TPV) rose 81% year-over-year on a constant currency basis to $ 25.3 billion during the quarter. The tariff rate for the entire fintech ecosystem rose from 3.19% to 3.84% between the first quarters of 2021 and 2022, indicating that economies of scale kick in.

MercadoLibre still generates most of the revenue from its online marketplaces, but the entire business is still growing rapidly. Revenue and adjusted EBITDA increased by 35% and 31%, respectively, in 2021. This year, analysts expect that both revenue and adjusted EBITDA will increase by around 47%.

MercadoLibre’s stock appears to be reasonably 35 times this year’s adjusted EBITDA – and it may still have plenty of room to run as revenue levels and e-commerce penetration rates rise across Latin America.

3. Visa

Visa is sometimes considered a “traditional” finance company, but its huge payment network – which is currently tied to 3.6 billion cards and accepted at over 70 million retail locations in over 200 countries – actually makes it one of the largest fintech companies .

On its own, Visa does not issue any cards or assume any obligations from consumers. Instead, it cooperates with banks – which actually issue and support their own Visa-marked cards. Visa then generates most of its revenue by charging companies “sweepstakes” to access the network.

Most digital payment platforms, such as PayPal or apple Pay, is still often linked to an underlying credit card from Visa or its top rival, Mastercard. Many of Visa’s partners have also added Near Field Communication (NFC) tags to their cards to enable push-to-pay features and contactless payments.

Visa has even begun rolling out cryptocurrency-linked debit cards across several markets over the past year, in addition to its own “buy now, pay later” BNPL network, called Visa Ready, to help banks meet BNPL challengers like ConfirmBlock’s Afterpay and PayPal’s Pay in 4.

Visa’s revenues and adjusted earnings grew by 10% and 17% respectively in 2021, as its total processed transactions increased by 17%. Analysts expect revenues and earnings to increase by a further 19% and 21%, respectively, this year – even when the inflation wind blows the economy. The stock is still reasonably valued at 24 times futures earnings, and it should still be a solid blue-chip alternative to the market’s more speculative fintech games.