Fintech stocks have suffered hugely since the turn of the year, but is this steep drop in value warranted, and where is the industry going?
Fintech investors haven’t had the most brilliant start to the year by any means. Many of last year’s most eagerly anticipated Fintech debutants are now down over 60%, and even market leaders like Block (NYSE: SQ) — formerly Square — and PayPal (NASDAQ: PYPL) have suffered significant downturns.
All is not lost for fintech, however.
Fintech’s mixed performance
The uniformity in the drop of many of last year’s Fintech IPOs suggests that this industry was simply overvalued at the time — particularly regarding new public businesses. Toast (NYSE: TOST), Affirm (NASDAQ: AFRM), and Robinhood (NASDAQ: HOOD) are all down between 62% and 65% respectively from their IPO prices. According to our analyst, Mike, in his latest Insight piece,
“…while you can cite company-specific issues, this looks like an industry-wide drop, as evidenced by market leaders Square and Paypal seeing similar downturns.”
While an industry-wide drop of this magnitude is hard to stomach for shareholders, it doesn’t necessarily speak to the state of the industry as a whole. As Affirm founder, Max Levchin, put it when questioned about his company’s performance in February, “the market seems to be having a bit of an identity crisis. We are certainly not.”
These companies are still innovating and growing. Only this week Robinhood announced the launch of a new debit card that will allow investors to invest the spare change from purchases. While this feature isn’t entirely new, with other finance apps offering the service, it speaks to the manner in which these companies are continuing to improve their products.
And if you needed any further convincing that Fintech is far from finished, just look at Apple’s (NASDAQ: AAPL) latest acquisition. The Big Tech giant has purchased British fintech firm Credit Kudos in a deal reportedly worth $150 million. No details have emerged about the Cupertino-based company’s plans as of yet, but when Apple is doubling down on Fintech, you can rest assured that the industry is likely going places.