In this article, we will be taking a look at the 12 most promising fintech stocks to buy.

The Financial Technology (fintech) sector has been benefitting immensely from growing investments since the last global financial crisis. With the world becoming increasingly aware of the shortcomings of the conventional financial services industry after the 2008 financial crisis, the expansion of fintech arose as a reaction. This is commonly known as the first wave of fintech, with the second wave coming about quite recently during the COVID-19 pandemic. During this time, the fintech sector evolved even further as financial institutions took steps to partner with emerging technology companies to gain access to newer markets.

The trends noticed in the second wave of fintech explain how today, apart from pure fintech companies like Coinbase Global, Inc. (NASDAQ:COIN), conventional financial companies like Mastercard Incorporated (NYSE:MA), and Visa Inc. (NYSE:V) are also beginning to join the fintech sector. Today, these companies are the most exciting fintech innovators to follow. Mastercard Incorporated (NYSE:MA) and Visa Inc. (NYSE:V) have both been working with third-party merchants on smart-chip technologies for contactless payment and more. These companies have also launched cards with embedded fingerprint scanners that act as biometric readers. They are also focusing on expanding their application programming interfaces to simplify their networks and increase their attractiveness to fintech startups.

With the growing interest in fintech mentioned above, it is unsurprising how much the sector’s revenue is expected to increase in the near future. According to a Deloitte report, the global fintech revenue is expected to grow at a compound annual growth rate of 11.7% between 2019 and 2024. Between 2018 and 2020, the STOXX Global Fintech Index also rose by 50%. The fintech sector also saw share price recoveries within four months after COVID-19 hit the capital markets, demonstrating the sector’s ability to rebound in times of economic turmoil. As a result, analysts and investors alike are highly bullish on the fintech sector today, leading us to compile a list of the most promising fintech stocks to buy today.

Our Methodology

We scoured the fintech stocks universe and picked 12 stocks with strong upside potential based on average analyst price targets. We used TipRanks data as the source for average price targets. These stocks are also popular among the 943 hedge funds tracked by Insider Monkey in the fourth quarter of 2022. They are ranked based on the number of hedge funds holding stakes in them, from the lowest to the highest.

Most Promising Fintech Stocks To Buy

12. Affirm Holdings, Inc. (NASDAQ:AFRM)

Upside Potential as of February 22: 15.7%

Average Price Target: $15.04

Number of Hedge Fund Holders: 22

Affirm Holdings, Inc. (NASDAQ:AFRM) is an information technology company operating a platform for digital and mobile-first commerce in the US, Canada, and internationally. The company offers a point-of-sale payment solution for consumers, merchant commerce solutions, and a consumer-focused app. It is based in San Francisco, California.

DA Davidson’s analyst Christopher Brendler holds a Buy rating on Affirm Holdings, Inc. (NASDAQ:AFRM) shares as of February 9, alongside a $20 price target.

Affirm Holdings, Inc. (NASDAQ:AFRM) is a leader in the Buy Now Pay Later area, and it has made deals with companies like Amazon.com, Inc. to offer its BNPL services. As of this February, the company has grown its active consumers by 39% year-over-year to 15.6 million. The company’s merchants have also increased year-over-year by 45% to 243,000. This demonstrates the promising nature of Affirm Holdings, Inc.’s (NASDAQ:AFRM) strong brand.

In total, 22 hedge funds were long Affirm Holdings, Inc. (NASDAQ:AFRM) in the fourth quarter, with a total stake value of $65.2 million.

Affirm Holdings, Inc. (NASDAQ:AFRM), like Coinbase Global, Inc. (NASDAQ:COIN), Mastercard Incorporated (NYSE:MA), and Visa Inc. (NYSE:V), is a fintech company with overwhelming potential according to hedge funds today.

11. SoFi Technologies Inc. (NASDAQ:SOFI)

Upside Potential as of February 22: 21.78%

Average Price Target: $7.94

Number of Hedge Fund Holders: 25

SoFi Technologies Inc. (NASDAQ:SOFI) is a digital financial services provider based in San Francisco, California. The company operates through its Lending, Technology Platform, and Financial Services segments. Its products and services allow consumers to borrow, save, spend, invest and protect their money.

Ashwin Shirvaikar at Citigroup holds a Buy rating on SoFi Technologies Inc. (NASDAQ:SOFI) shares as of January 31.

The company has demonstrated significant growth potential in the fourth quarter. SoFi Technologies Inc. (NASDAQ:SOFI) increased its net interest income by 138% year-over-year in the period. Company management also sees more potential in its growing brand power, as annualized revenue per product increased from $21 in the fourth quarter of 2021 to $40 in the fourth quarter of 2022. This demonstrated more brand awareness for SoFi Technologies Inc. (NASDAQ:SOFI) products among consumers.

Silver Lake Partners was the largest shareholder in SoFi Technologies Inc. (NASDAQ:SOFI) at the end of the fourth quarter, holding 31.2 million shares worth about $143.6 million. In total, 25 hedge funds were long the stock, with a total stake value of $371.3 million.

10. Nu Holdings Ltd. (NYSE:NU)

Upside Potential as of February 22: 35.84%

Average Price Target: $6.5

Number of Hedge Fund Holders: 31

Nu Holdings Ltd. (NYSE:NU) is a digital financial services platform and technology company. It operates mainly in Brazil, Mexico, and Colombia and is based in São Paulo, Brazil.

Wolfe Research analyst Darrin Peller holds an Outperform rating on Nu Holdings Ltd. (NYSE:NU) shares as of January 5.

Warren Buffett is the largest shareholder in Nu Holdings Ltd. (NYSE:NU) as of the end of the fourth quarter. In 2022, Buffett’s Berkshire Hathaway bought a $1 billion stake in the company. Buffett’s interest in the company is a strong indicator of its immense growth potential. Nu Holdings Ltd. (NYSE:NU) also reported a 171% increase in its revenue for the quarter that ended September 30, bringing it up to a record $1.3 billion.

A total of 31 hedge funds were long Nu Holdings Ltd. in the fourth quarter, with a total stake value of $1.2 billion.

9. Robinhood Markets Inc. (NASDAQ:HOOD)

Upside Potential as of February 22: 31.24%

Average Price Target: $12.94

Number of Hedge Fund Holders: 32

Robinhood Markets Inc. (NASDAQ:HOOD) is an investment banking and brokerage company based in Menlo Park, California. The company offers a platform through which users can invest in stocks, exchange-traded funds, options, gold, and crypto.

As of January 10, JMP Securities analyst Devin Ryan holds an Outperform rating on Robinhood Markets Inc. (NASDAQ:HOOD) shares, alongside a $25 price target.

Robinhood Markets Inc. (NASDAQ:HOOD) demonstrated growth in the fourth quarter when its revenue grew by 5% year-over-year to $380 million. The company is also expected to benefit from the rising prices of Bitcoin and Dogecoin. Bitcoin rose by over 40% in January, and since Robinhood Markets Inc. (NASDAQ:HOOD) depends on crypto and options for its transaction-based revenues, analysts expect the company to fare better in the coming months.

Robinhood Markets Inc. (NASDAQ:HOOD) was found in the 13F holdings of 32 hedge funds at the end of the fourth quarter. Their total stake value was $652 million. ARK Investment Management was the largest shareholder in the company, holding 29.2 million shares worth $238.1 million.

8. Paylocity Holding Corporation (NASDAQ:PCTY)

Upside Potential as of February 22: 38.65%

Average Price Target: $282.42

Number of Hedge Fund Holders: 33

Paylocity Holding Corporation (NASDAQ:PCTY) is an application software company providing cloud-based human capital management and payroll software solutions in the US. The company is based in Schaumburg, Illinois. It works to simplify payroll, automate processes, and more.

Cowen analyst Bryan Bergin holds an Outperform rating on Paylocity Holding Corporation (NASDAQ:PCTY) shares as of February 3. The analyst also raised his price target on the stock from $231 to $265.

The company beat its revenue guidance in the first fiscal quarter of 2023 by $12 million, when revenue came in at $253.3 million. Paylocity Holding Corporation (NASDAQ:PCTY) generated a profit of $84.5 million in this quarter, which was an increase of $21 million year-over-year. The company is currently guiding for a full-year 2023 revenue of $1.1 billion to $1.2 billion, up about 32% from the previous year.

Paylocity Holding Corporation (NASDAQ:PCTY) had 33 hedge funds long its stock in the fourth quarter, with a total stake value of $798 million.

ClearBridge Investments, an investment management firm, mentioned Paylocity Holding Corporation (NASDAQ:PCTY) in its fourth-quarter 2022 investor letter. Here’s what the firm said:

“Paylocity Holding Corporation (NASDAQ:PCTY) also held up well against broad customer spending slowdowns earlier in the year but saw its share price weaken on broader macro headwinds during the quarter. The company’s cloud-based human capital management and payroll software solutions help businesses manage through broad labor shortages and provide solutions to retain talent. However, as excess slack in the labor market has begun to be absorbed, investments in human resources solutions have declined. Additionally, we believe Paylocity continues to have a compelling long-term growth runway as it attracts new customers and gains market share against large, mature competitors.”

7. Block, Inc. (NYSE:SQ)

Upside Potential as of February 22: 22.41%

Average Price Target: $97.35

Number of Hedge Fund Holders: 70

Block, Inc. (NYSE:SQ) is a data processing and outsources services company based in San Francisco, California. It creates tools that help sellers to accept card payments, alongside providing reporting and analytics, and next-day settlement.

KeyBanc raised its price target on Block, Inc. (NYSE:SQ) shares on February 22 from $90 to $100. The firm holds an Overweight rating on the stock.

6. Mercadolibre, Inc. (NASDAQ:MELI)

Upside Potential as of February 22: 16.04%

Average Price Target: $1,468.75

Number of Hedge Fund Holders: 75

Mercadolibre, Inc. (NASDAQ:MELI) is an internet and direct marketing retail company based in Montevideo, Uruguay. The company operates online commerce platforms in Latin America. Its platform, Mercado Libre Marketplace, enables businesses, merchants, and individuals to list merchandise and conduct sales online.

On February 21, Credit Suisse analyst Stephen Ju reiterated an Outperform rating on Mercadolibre, Inc. (NASDAQ:MELI) shares. The analyst also raised his price target on the stock from $1,450 to $1,685.

Mercadolibre, Inc. (NASDAQ:MELI) has recently partnered with WhatsApp Pay in a bid to expand its e-commerce and fintech market share in Brazil. The company is set to benefit from the new customers available to it through this partnership, since WhatsApp has the highest penetration rate in the Latam social media market, going up to 90% by 2022. Mercadolibre, Inc. (NASDAQ:MELI) has also been seeing promising growth in its Argentina operations, with operating margins of 38.4%.

Generation Investment Management was the largest shareholder in Mercadolibre, Inc. (NASDAQ:MELI) at the end of the fourth quarter, holding 707,061 shares worth about $598.3 million. In total, 75 hedge funds were long the stock, with a total stake value of $3.2 billion.

Lakehouse Capital, an investment management company, mentioned Mercadolibre, Inc. (NASDAQ:MELI) in its November 2022 investor letter. Here’s what the firm said:

“A noteworthy result in November was Buenos Aires based e-commerce leader Mercadolibre, Inc. (NASDAQ:MELI), which posted another impressive quarterly result despite ongoing macro concerns. The company delivered net revenue growth of 45% year-on-year in U.S. dollar terms along with a steady increase in operating profitability, with operating margins increasing 240 basis points to 11%. Its marketplace business experienced strong growth across all key markets – namely Brazil, Argentina and Mexico – and generated $8.6 billion in gross merchandise value, up 32% year-on-year. It was also pleasing to see unique buyers increase 10% to 42.5 million and items purchased per buyer remain broadly stable, indicating stickiness among recently acquired users and market share gains in some of its largest markets, particularly Brazil.”

5. Intuit Inc. (NASDAQ:INTU)

Upside Potential as of February 22: 22.51%

Average Price Target: $480.36

Number of Hedge Fund Holders: 92

Intuit Inc. (NASDAQ:INTU) is an application software company providing financial management and compliance products and services. It is based in Mountain View, California.

Josh Beck at KeyBanc holds an Overweight rating on Intuit Inc. (NASDAQ:INTU) shares as of January 4. The analyst also raised his price target on the stock from $400 to $425.

Intuit Inc. (NASDAQ:INTU) has been growing its customer base over the past few years, and with its shift to the online ecosystem, analysts now forecast a customer growth of 11.9%, reaching 12.6 million by 2027. The company’s online ecosystem has a five-year average growth of 39.4%.

There were 92 hedge funds long Intuit Inc. (NASDAQ:INTU) at the end of the fourth quarter. Their total stake value was $5.6 billion.

Fundsmith, an investment management company based in London, mentioned Intuit Inc. (NASDAQ:INTU) in its 2022 yearly investor letter. Here’s what the firm said:

“Take the example of Microsoft and Intuit Inc. (NASDAQ:INTU). Microsoft shares are currently being valued at a P/E ratio of 25.0 times the consensus EPS estimate for the fiscal year ending June 2023. Meanwhile, Intuit is being valued at 28.4 times the non-GAAP consensus estimate for the fiscal year ending July 2023. Many investors and analysts may accept that Intuit is trading at a higher multiple given expectations of greater growth potential. However, Intuit removes share-based compensation from their non-GAAP EPS whereas Microsoft does not. Given that Intuit’s GAAP EPS guidance for the year ending 31st July 2023 is $6.92–$7.22, its non-GAAP guidance is $13.59–$13.89, and the consensus estimate for 2023 EPS is at $13.69, it seems clear that most sell-side analysts are accepting the company’s non-GAAP adjustments, which includes the removal of some $1.8bn of share-based compensation, in their estimates. If we include the impact of share-based compensation in Intuit’s 2023 EPS to make a more apples-to-apples comparison with Microsoft based upon GAAP EPS, Intuit’s 2023 EPS would be closer to $9, meaning that the shares would be trading at a multiple of about 43 times. I think investors and analysts may find a premium of 14% for Intuit over Microsoft (28.4 times versus 25.0 times) to be reasonable. I’m not so sure they are fully aware that Intuit shares are actually trading at a premium of 73% if share-based compensation is treated in the same manner between the two companies.

Many investors and analysts, including us, look to cash flow metrics more than accrual profits. Unfortunately, share-based compensation may cause distortions in cash flow metrics as well, even when they follow GAAP. Under GAAP, share-based compensation is added back in the cash flow from operating activities, which in turn is used in the computation of free cash flow.  ..” (Click here to read the full text)

4. Bank of America Corporation (NYSE:BAC)

Upside Potential as of February 22: 16.98%

Average Price Target: $40.17

Number of Hedge Fund Holders: 100

Bank of America Corporation (NYSE:BAC) is a diversified banking company. It has launched several digital financial solutions for its clients to consolidate funds and make digital payments to their customers.

Citigroup analyst Keith Horowitz holds a Neutral rating on Bank of America Corporation (NYSE:BAC) shares as of January 17.

Bank of America Corporation (NYSE:BAC) has a P/E ratio of 9.9, which is relatively low for a banking stock. The company has been working to diversify its loan mix over the past few years, which has reduced its overall credit risk as well. Since 2009, the bank has reduced its consumer loans to 44% in 2022. It has also increased commercial loans to 56% over the same period. These measures are enabling to company to perform well in 2023.

Out of the 943 hedge funds tracked by Insider Monkey in the fourth quarter, 100 funds were long Bank of America Corporation (NYSE:BAC). Their total stake value was $37.6 billion.

3. Paypal Holdings, Inc. (NASDAQ:PYPL)

Upside Potential as of February 22: 49.94%

Average Price Target: $111.73

Number of Hedge Fund Holders: 115

Paypal Holdings, Inc. (NASDAQ:PYPL) is an information technology company based in San Jose, California. It operates a tech platform that enables digital payments.

An Outperform rating was reiterated on Paypal Holdings, Inc. (NASDAQ:PYPL) shares on February 13 by James Fotheringham at BMO Capital. The analyst also placed a $108 price target on the stock.

At the end of the fourth quarter, 115 hedge funds were long Paypal Holdings, Inc. (NASDAQ:PYPL). Their total stake value was $5.1 billion.

RiverPark Advisors, an investment advisory firm, mentioned Paypal Holdings, Inc. (NASDAQ:PYPL) in its fourth-quarter 2022 investor letter. Here’s what the firm said:

“PayPal Holdings, Inc. (NASDAQ:PYPL)l: PayPal shares were a top detractor for 4Q, reporting slightly weaker than expected 3Q payment volumes and 4Q payment volume guidance. The company nevertheless reported betterthan-expected EPS on improved margins. PYPL operates at significantly lower margins than its payment competitors Visa and Mastercard, and 3Q results and 4Q guidance show early improvements in its margins and ability to drive higher cash flow growth in the near term. For 3Q, PYPL reported $1.8 billion of FCF, the highest quarterly FCF number in its history, representing 37% growth. The company expects continued operating margin expansion for 4Q and full year FCF of more than $5 billion, representing a 6% FCF yield.

PayPal is the most accepted digital wallet – with almost triple the acceptance of Apple Pay, the number two digital wallet. PayPal is a key beneficiary of the ongoing shift to ecommerce driven digital payments, as well as consumer-to-consumer payment trends through its Venmo peer-topeer (P2P) payment service. With a 3Q non-GAAP operating margin of 22%, PYPL also has significant margin expansion potential given that competitors Adyen, Visa and Mastercard have 50%-65% operating margins. We believe the combination of secular growth, expanding operating leverage and the strategic use of the company’s significant and growing cash balance should fuel high teens earnings growth over the next five years. This, to us, presents an excellent risk/reward given that PYPL trades at a below market multiple.”

2. Mastercard Incorporated (NYSE:MA)

Upside Potential as of February 22: 18.96%

Average Price Target: $422.65

Number of Hedge Fund Holders: 139

Mastercard Incorporated (NYSE:MA) is a data processing and outsources services company. It has added the Mastercard Fintech Express to its Mastercard Accelerate platform to allow fintechs to get access to digital-first products.

Dan Dolev at Mizuho holds a Buy rating on Mastercard Incorporated (NYSE:MA) shares, alongside a $405 price target, as of January 30.

A total of 139 hedge funds were long Mastercard Incorporated (NYSE:MA) in the fourth quarter. Their total stake value was $15.7 billion.

Baron Funds, an investment management company, mentioned Mastercard Incorporated (NYSE:MA) in its fourth-quarter 2022 investor letter. Here’s what the firm said:

“Shares of global payment network Mastercard Incorporated (NYSE:MA) increased after reporting strong quarterly results, with 15% revenue growth and 13% EPS growth despite significant headwinds from currency movements and the suspension of operations in Russia. Payment volume grew 21% in local currency (excluding Russia) as consumer spending remained resilient and the international travel recovery continued as border restrictions were lifted. We continue to own the stock due to Mastercard’s long runway for growth and significant competitive advantages.”

1. Visa Inc. (NYSE:V)

Upside Potential as of February 22: 18.4%

Average Price Target: $260.81

Number of Hedge Fund Holders: 177

Visa Inc. (NYSE:V) is a payments technology company based in San Francisco, California. The company is a world leader in fintech and digital payments.

Barclays’ Ramsey El-Assal holds an Overweight rating on Visa Inc. (NYSE:V) shares as of January 29, alongside a price target of $270.

The company’s market share in the credit card networks area is 52.6%, and it also has a high operating margin of over 67%. Visa Inc. (NYSE:V) saw revenue growth of 12.4% year-over-year in the fiscal first quarter of 2023, bringing in revenues of $7.94 billion. Analysts are highly optimistic on the stock, with Mizuho raising its price target on Visa Inc. (NYSE:V) from $220 to $240, for example.

Out of the 177 hedge funds long Visa Inc. (NYSE:V) in the fourth quarter, TCI Fund Management was the largest shareholder in the company. The fund held 19.9 million shares. The total stake value in the company was $26.5 million.

Baron Funds, an investment management company, mentioned Visa Inc. (NYSE:V) in its fourth-quarter 2022 investor letter. Here’s what the firm said:

“Shares of global payment network Visa Inc. (NYSE:V) increased after reporting strong quarterly results, with 19% growth in revenue and EPS despite currency headwinds and the suspension of operations in Russia. Payment volume grew 16% in local currency (excluding Russia and China) with notable strength in cross-border volumes driven by rebounding international travel. Management also provided encouraging guidance for the next fiscal year. We continue to own the stock due to Visa’s long runway for growth and significant competitive advantages.”

See also 12 Best Fintech Stocks To Buy and 11 Best Motley Fool Stocks To Buy.

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Disclosure: None. 12 Most Promising Fintech Stocks To Buy is originally published on Insider Monkey.