The tech selloff of 2022 wasn’t too kind to some of the fintech pure plays. With a recession likely creeping up at some point over the next year or so, consumer spending could be poised to take more blows to the chin. Regardless, I still see a long-term growth runway in the payments space. It’s a very large arena where there may be more than just a handful of winners.
As the recession comes and goes, I think payments could be in a spot to make up for lost time again. That said, investors need to be very selective when it comes to industry players.
Not all companies are best positioned to make the most of a long-term opportunity at hand. The companies that know how to compete and claw away market share may be the ones that end up taking the lion’s share of a total addressable market. In any case, a bit of competition is always a good thing for consumers.
In this piece, we’ll briefly look at three fintech-flavoured plays (some pure plays; others not) that could do well in a post-recession environment.
Lightspeed Commerce
First, we have the Canadian commerce enabler Lightspeed Commerce (TSX:LSPD). The Canadian company boomed in 2020 and early 2021, only to go bust in late 2021 and 2022. Indeed, the point-of-sales play seems to be in the doghouse. But I don’t think it’ll stay there forever, even as shares begin to fluctuate in a range (the high teens to 20s). The $3.64 billion company still stands to benefit greatly come the next consumer-spending surge, whenever that may be.
For now, look for Lightspeed to keep bringing on new customers, even as it looks to run into a tougher environment for all industry players. Once the tides turn, I’d pin LSPD stock as one of the names that could be quick to move. At 3.67 times price to sales, I view LSPD as a mid-cap commerce software gem in the rough.
Block
Block (NYSE:SQ), formerly Square, is a payments powerhouse that got demolished last year. The stock is still off more than 72% from its high but appears to be inching back on the right track, with the stock now up 40.5% since the May lows.
Undoubtedly, the payments firm has a lot of intriguing offerings it can use to climb higher. The company’s latest credit card offering (Square Credit Card) looks pretty intriguing. It lacks annual fees and may be able to garner enthusiasm as the payments space moves on from its nasty selloff.
In any case, SQ stock looks enticing at 2.42 times price to sales. I believe that’s way too cheap for a Jack Dorsey company.
Apple
Finally, we have Apple (NASDAQ:AAPL), the $3 trillion consumer tech behemoth, which has been increasing its services business to encompass financial services, payments included. Undoubtedly, many of us iPhone users use Apple Pay regularly. With Apple Pay Later, the Apple Card, and a new high-yield savings account (only available in the U.S. still), Apple stands to disrupt incumbent payment service providers in a huge way.
I think Apple has a lot of ground to run in payments. But, of course, financial services are less of a needle mover for the tech giant than the smaller pure plays mentioned in this piece. Regardless, AAPL stock still looks like a great buy, even as the price-to-earnings multiple approaches 33 times trailing.
