FinTech Stocks Feel the Cold Winds of Change as Investor Demand Wanes
Once among the hottest stars on Wall Street, FinTech startups lit up the New York Stock Exchange and NASDAQ, dazzling investors as the pandemic turbo-charged digital adoption of just about everything.
But now many of those big names — think PayPal, Block (formerly Square) and Robinhood — are feeling the bitter cold winds of change as investor demand cools, triggering a freefall of tumbling share prices. While people are still embracing much of the pandemic’s digital lifestyle, stimulus checks and other handouts are gone and life has returned to normal — albeit a slightly redefined normal.
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Investors have been unloading previously top-performing FinTech brands along with a wider selloff of tech stocks in general, possibly ahead of forecasted hikes in interest rates, the Wall Street Journal reported on Wednesday (Dec. 29).
For example, Block lost 35 percent of its value since September and 23 percent since the year started. PayPal dropped 30 percent since September and 18 percent since the start of 2021. Robinhood is trading at 50 percent below its July initial public offering (IPO) price, according to the WSJ.
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Stocks that catered to the pandemic’s do-everything-from-home environment such as Zoom and Peloton are also on the other side of their headline-making days.
There are some FinTechs that are still on the upswing, such as the accounts payables payments platform Bill.com, which is up 86 percent, per WSJ.
The artificial intelligence (AI) FinTech lending platform Upstart Holdings initially saw a nearly 10-fold increase in its share price through the middle of October as people started borrowing again, combined with federal aid to stave off defaults.
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Upstart’s shares held the position of being the “best-performing big company listed on the Nasdaq exchange,” the WSJ reported.
This month, however, that's changing. Upstart’s price target was dropped to $175 from $300 by Jefferies analyst John Hecht, in part due to apprehension over loan performance.
The other reason for the drop is because Upstart’s FinTech counterparts are “trading at lower price-to-earnings multiples,” Hecht told the WSJ, adding that “Investors are moving away from risk.”