Donald Trump’s resounding election win has come amid a perfect storm of positive earnings results and widespread industry optimism for the fintech sector on Wall Street. With finance technology stocks performing exceptionally well during earnings results season, these three stocks may be poised for a strong end to 2024.
We’ve already seen strong earnings performance from key fintech firms like Robinhood, Coinbase, Upstart, and Toast in the fourth quarter, and it appears that this could only be the start of a more sweeping rally for the industry as a whole as Wall Street welcomed the news of Trump’s return to the White House with brand new highs.
In the wake of Trump’s victory and the Republican party gaining control of the Senate as well as the House of Representatives, the S&P 500 ticked above 6,000 for the first time in its history. However, it was fintech stocks that continued to outpace much of the market.
The ARK Fintech Innovation ETF (ARKF) now stands more than 85% higher than one year ago and grew 20% in the week that followed the November 5 election alone.
Elsewhere, there may be some hope for fintech firms that have underperformed of late. Following the announcement of Marqueta’s fourth-quarter revenue growth of 10% to 12%, well below consensus estimates of 17%, CEO Simon Khalaf blamed regulatory environment changes on the slowdown.
President-elect Donald Trump’s more liberal approach to regulation has already prompted a seismic cryptocurrency rally that saw Bitcoin reach a new all-time high value as voting results swept through the United States, and a looser regulatory environment may see more innovative fintechs scale at a faster pace.
However, economists have also warned of Trump’s use of tariffs on foreign trade, which may not only hamper supply chains but also lead to a return for high inflation rates during his second term.
Although this may lead to some uncertainty among Wall Street’s brightest fintech innovators today, these three stocks appear well-positioned to secure growth as the sector continues to reap the rewards from a post-election relief rally:
Robinhood (HOOD)
Even while Robinhood’s (NASDAQ:HOOD) stock languished following a series of controversies surrounding gamification and the fallout of the GameStop meme stock saga, there was a long-held belief among its most loyal investors that the return of a cryptocurrency rally would see the investing platform stage a Wall Street recovery.
The election of Donald Trump has been excellent news for HOOD, a stock that specializes in cryptocurrency investments. Trump has sought to keep crypto investors on side during the campaign trail and even pledged to make America ‘the crypto capital of the world’ in a speech at the Bitcoin 2024 conference in Nashville.
Despite the stock missing its Q3 earnings forecasts, bullish sentiment around the stock persisted with one JMP analyst raising their price target to $33 from $30 for HOOD on October 31.
It transpired that Robinhood needed little more than one week to reach the old $30 target, soaring nearly 37% in the first week of November alone off the back of Trump’s victory and a subsequent cryptocurrency market rally.
Early indications suggest that the company is returning to form. Data suggests that Robinhood experienced a 48% surge in equity trading volumes to $126.4 billion in October compared to September, while the platform’s user base soared to more than 24.4 million funded customers.
Expectations for cryptocurrencies like bitcoin are high for the months ahead. The April 2024 BTC halving event was joined by the SEC’s approval of spot bitcoin ETFs on Wall Street, both of which were cited as catalysts for future growth by investors. With some anticipating bitcoin’s recent all-time high to be just the tip of the iceberg, HOOD may be in line for some exponential growth moving into 2025.
Affirm (AFRM)
As a leading provider of buy now, pay later (BNPL) services, Affirm (NASDAQ:AFRM) appears set to continue posting impressive growth rates.
BNPL, or pay-in-three, services have become an exceptionally popular facet of the fintech boom in the post-pandemic landscape. Allowing customers to break down their purchases into a series of interest-free payments, the evolution of payments has made BNPL a seamless experience at a time when consumer spending power has been impacted by factors like inflation and higher interest rates.
Much like Robinhood, Affirm has also enjoyed rapid growth at the beginning of November, posting a rise of more than 33% in the first 10 days of the month.
The stock is also backed by strong revenue growth. Posting revenue increases of 71% and 55% during fiscal 2021 and 2022 respectively, AFRM has been bolstered by increases in online purchases and effective social media marketing campaigns.
While its revenue increase of 18% in fiscal 2023 is notably lower, it’s worth acknowledging the harmful impact of inflation on consumer spending and the weaker performance of top customer Peloton during this period.
Since then, Affirm has added customers like Amazon, Walmart, and Target, boosting revenue by 46% in fiscal 2024. With consumer spending likely to increase as the festive season gets into gear, we can expect this fintech to continue posting impressive results into the future.
Block (SQ)
Block (NYSE:SQ) is one of the world’s leading fintech firms and caters to many different areas of the industry. As the parent company of Square, CashApp, and Afterpay, Block has a presence in areas like payment hardware and software as well as key sector analytics.
After posting consensus-matching Q3 earnings-per-share (EPS) of $0.88 and revenue of $5.98 that fell short of estimates of $6.24 billion, the stock has gone from strength to strength.
The stock accelerated 15.56% over the first 10 days of November 2024 as part of the post-election relief rally that saw more fintechs climb higher on Wall Street.
With a market capitalization of $53 billion and a research and development budget of $720 million reported for the last quarter, Block is set to remain a leading innovator in the fintech landscape and a stock to watch should Trump’s second term in office drive industry growth.
Crucially, Block also reportedly holds 8,027 bitcoin worth $711 million at the time of writing. This total, alongside the value of Block as a fintech focused on leveraging crypto transactions, could help to foster further growth should a wider cryptocurrency rally take place in the months ahead.
How Far can The Fintech Rally Go?
Post-election relief rallies can be unpredictable in terms of scale and longevity. Additionally, the value of Wall Street’s brightest fintech players is liable to fluctuate as we gain a clearer idea of which pledges Trump will prioritize when the President-elect returns to the White House.
Despite the political uncertainty that’s likely to impact the fintech sector in the wake of the election, the strong fundamentals of the industry’s brightest players and their implementation throughout different sectors point to a bright future for finance technology firms on Wall Street.
As a result, it’s worth investors tracking retail-focused and cryptocurrency-facing fintech stocks over the months ahead. Should consumer confidence and crypto acceptance continue to grow, we’re likely to see fintech benefit as a whole.
