Along with other disruptive growth fare, fintech stocks and exchange traded funds are taking their lumps, but there’s still a compelling long-term case for being engaged with this group.
For patient investors, that implies that funds such as the ARK Fintech Innovation ETF (ARKF) won’t be permanently mired in current funks. In fact, some analysts are bullish on the longer-ranging fintech opportunity set.
In a Monday note to clients, Wells Fargo analyst Jeff Cantwell initiated coverage of Block, PayPal, and Shopify with overweight ratings, saying that a $1.5 trillion annual revenue opportunity is ahead of fintech companies and annual growth could reach 6% over the coming decade.
“Rapidly accelerating trends in digitization of payments, the shift of business tools online and the consolidation of vendors will drive growth in the sector, the analyst said. Other factors that will boost the industry is the growth of ‘fintech-as-a-service’ technologies and the rise of cryptocurrencies,” reports Sarah Min for CNBC.
Actively managed, the $1.57 billion ARKF allocates 11.44% of its weight to Block, making the company formerly known as Square the fund’s largest holding. Shopify is in the third spot at a weight of 9.71%, according to ARK Investment Management data. PayPal currently is among ARKF’s 30 holdings, though it has been part of the ETF’s portfolio in the past.
“Block will continue to gain share with its Square and Cash App, Wells Fargo said, noting they were also interested in the company’s cryptocurrency aspirations. Wells started coverage of Block with a price target of $165 per share, implying 23% upside from here,” according to CNBC.
For its part, e-commerce platform provider Shopify, previously a high flier, lost nearly half its value just this year, but Wells Fargo still sees opportunity in the name.
“Now is a highly opportune time for investors to take a fresh look at Fintech given current valuations,” adds Cantwell. “We expect that these companies’ fundamentals will strengthen in ’22/’23 and that the group’s current discount to the broader market will not hold.”
Other marquee ARKF components include Coinbase (NASDAQ:COIN), MercadoLibre (NASDAQ:MELI), and DraftKings (NASDAQ:DKNG).
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