Fintech engagement remains strong, can support this ETF

Due to increasing competition and the volatility of the cryptocurrency market, some fintech stocks are facing headwinds this year.

Conversely, there is good news and it comes in the form of continued strong customer engagement with fintech mobile applications and other offers. It can support long-term upside for exchange-traded funds such as ARK Fintech Innovation ETF (ARKF).

A recent Deutsche Bank survey of 1,708 fintech mobile app users shows continued strength, particularly among Cash App and Apple Pay. It is relevant to ARKF investors because Cash App’s parent company is Block (SQ)which is ARKF’s third largest holding.

“While PayPal continues to be the dominant mobile payment service with 71% of respondents using the service in the past 12 months, both Cash App and Apple Pay saw big increases in usage over the past year, reaching 46% and 31% usage respectively. , up from 31% and 23% respectively last year,” wrote Deutsche analyst Bryan Keane.

PayPal (PYPL) is the company behind the popular Venmo app, which is Cash App’s most direct competitor. Currently, Venmo has the larger market share, but the Cash App is making inroads and data indicates that the Block offering could continue to take market share from rivals.

“Within our coverage, we believe SQ’s Cash App had the strongest metric improvement since our last survey and continues to be well positioned to connect the merchant and consumer ecosystems, especially as it expands the launch of Cash App Pay in the months ahead,” added to. Keane.

Another catalyst for selected ARKF member firms, including Block, is the development of the still young buy-now-pay-later (BNPL) market. Data confirms that more consumers are embracing that way of shopping, choosing to get the goods they want today, while paying in full over several installments.

“Furthermore, BNPL has shown a strong increase in adoption with 22% of respondents using a BNPL app over the past year (vs. 11% last year) and while we will continue to monitor default risks in the area, we expect the number respondents to miss a BNPL payment in the next 12 months fell to 28% this year from 33% last year,” Keane concluded.

Away from financial services, DraftKings (DKNG) may be another driver of ARKF’s upside. The online sportsbook, which is up 88% year-to-date, is the ETF’s fourth-largest holding. While the stock is clearly hot to start 2023, some analysts see more tailwinds in play.

“We estimate DKNG’s Q1 revenue slightly higher than the US market with +11% quarter-over-quarter on market share gains, helped by strength in new states (Ohio and Massachusetts),” Bank of America’s Shaun Kelley wrote in a Monday report . “However, our net gaming revenue (NGR) estimate is down 15% quarter-on-quarter due to new state promotions and seasonality of daily fantasy sports (DFS). We believe higher retention, improved product mix and shorter payback periods for new customers are tailwinds for DKNG.”

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The opinions and forecasts expressed herein are solely those of Tom Lydon and may not materialize. Information on this website should not be used or construed as an offer to sell, a solicitation of an offer to buy or a recommendation for any product.