Given that money — and technology — make the world go round, it’s not surprising that the combination can make for some of the world’s most rewarding investments. Here’s a closer look at three fantastic fintech stocks you can buy in quantity, even if you’ve only got $1,000 to work with.
Even if you haven’t heard of Bill Holdings(NYSE: BILL), there’s a very good chance your employer has. Bill offers a range of accounting software to enterprises of all sorts and sizes.
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It’s a seemingly crowded market dominated by brands like QuickBooks, NetSuite, and ZipBooks. Bill is still something of a standout within this space, though. Its software is built from the ground up to meet the unique needs of accounts receivable and accounts payable departments, accounting firms, and supervisors who just need to keep a handle on employees’ spending. The company monetizes this cloud-based technology by charging subscription fees for access to it, or by charging a small fee for every processed payment it facilitates.
Last quarter’s revenue was up 18% year over year, extending the company’s well-established top-line progress.
There’s no getting around the fact that Bill’s revenue growth is slowing down. Its revenue-retention rate is also falling, from better than 100% just a couple years ago to only 92% at the end of fiscal 2024 on June 30. It means at least some customers are discontinuing their service, or at least using its technology less. This slowdown could also be the result of economic headwinds that are forcing small businesses to cut costs whenever and however they can. Bill should at least be actively addressing both challenges, while sharing its plans with shareholders about how it’s doing that.
Just keep things in perspective. This company’s high-growth phase in 2022 and 2023 wasn’t exactly sustainable in light of the way it was being driven. Although top-line growth may be slowing now, profit margins are widening faster because sales have been growing much faster than spending has. This new norm makes for a higher-margin business, providing Bill Holdings with the fiscal flexibility it needs to navigate the two aforementioned challenges.
Data source: StockAnalysis.com. Chart by author.
The stock is still relatively expensive by almost all measures. It’s also trading a bit above the consensus price target around $82. These could seem to hold the stock back.
The thing is, the stock’s present price and analysts’ collective pessimism reflect more of the past than the plausible future. The more this stock bounces back from the big pullback following its pandemic-promoted 2021 peak, the more likely it is that the market will start pricing in this bright future. Bill’s solutions are what many enterprises and businesses have been waiting on for a long while.
Given the degree to which consumers have moved many aspects of their lives online (shopping, work, keeping up with friends, etc.), it comes as no surprise that folks are increasingly doing their banking online too. What may surprise you, though, is the extent to which it’s already happened.
Yet, there’s still much more of this shift left to play out.
As of its latest look at the data, the American Bankers Association says that within the United States, a mobile banking app is the most commonly used means of handling banking business, with 48% of customers making it their first option. Online banking (via a web browser) is a distant second at 23%. In-branch visits and telephone calls are relatively rare.
Connect the dots. Most banking consumers are self-sufficient these days, so much so that they rarely — if ever — need any help from an actual person.
Enter SoFi Technologies(NASDAQ: SOFI).
Founded in 2011 as a platform intended to help consumers better manage student loans, SoFi has since evolved into so much more. Checking accounts, loans, credit cards, insurance, and investments are all in its wheelhouse, with all of these services available in a purely online package.
Consumers are increasingly embracing these options. As of the end of September, the company boasts 9.4 million customers, extending what’s become a four-year uninterrupted streak of quarterly user growth from a count of 1.5 million customers in the same period of 2020. Revenue and earnings before interest, taxes, depreciation, and amortization (EBITDA) have grown at a similarly fast clip as these customers sign up for additional products and services once on board. The company swung to a sustained profit early this year and is expected to continue widening these profits going forward.
There’s certainly plenty more room for SoFi Technologies to continue this pace of growth into the distant future, too. Despite the online banking industry’s growth thus far, YouGov reports that only 3 out of every 10 U.S. consumers currently have an account with an online-only bank. The other 7 are up for grabs. They’re apt to come around soon enough. Market research outfit Straits Research predicts that the global online banking business is set to achieve annualized growth of nearly 14% through 2030, led by the North American market.
Finally, add American Express(NYSE: AXP) to your list of fintech stocks to scoop up if you’re currently sitting on an extra $1,000.
It’s obviously far better known than Bill Holdings or SoFi Technologies. American Express is, of course, a credit card name. Its payment network handled nearly $1.7 trillion worth of transactions last year and turned that into $13.5 billion worth of revenue. There are roughly 140 million American Express cards in consumers’ hands right now.
The thing is, AmEx is unlike more familiar credit card payment networks like Mastercard and Visa. It’s far more accurate to see American Express as a credit card provider as well as a payment network platform combined in a way that creates a powerful revenue-bearing credit card ecosystem.
Think about it. Although almost every credit card offers perks of some sort, few compare to those received by Amex cardholders. Hotel-stay credits, cash back on groceries, discounted streaming services, access to airport lounges, and more are just some of the reasons people (and businesses) will pay as much as $695 per year to hold an American Express card. Merchants, of course, also pay the company a small fee every time a member uses one of its cards at their establishment.
It’s also worth noting that Amex tends to attract more affluent consumers who may not be as adversely impacted by economic headwinds as the average consumer occasionally is. That’s at least part of the reason the company’s now reported 14 consecutive quarters of revenue growth, carrying it out of its pandemic-prompted funk in a rather impressive fashion.
Its future is bright, too. Millennials and Gen Z, in particular, are big fans, collectively accounting for about one-third of the company’s payment volume and the vast majority of last quarter’s new cardholders. This under-40 crowd is already accustomed to membership-based ecosystems like Amazon Prime and access to Costco‘s stores.
As this crowd ages at the same time Generation Alpha reaches adulthood, look for more consumers to become even more willing to pay for Amex’s superior perks.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. American Express is an advertising partner of Motley Fool Money. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Bill Holdings, Costco Wholesale, Mastercard, and Visa. The Motley Fool recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.
