Consumer preferences are changing quickly thanks to seemingly endless innovation, which means investors that are able to identify the companies finding ways to fulfill new expectations stand to profit in a big way over the coming years. Just think about some of the huge transformations in consumer finance that have seemingly occurred in the blink of an eye over the last few years.
Flexible payment options are now the norm, as new services like buy now, pay later have taken the industry by storm. People also want convenient mobile platforms that allow them to easily handle every aspect of their finances all in one place. Cutting-edge tech like artificial intelligence is making it more straightforward for consumers to get approved for loans, which was an antiquated process long overdue for a revamp. These trends have only been accelerating following the pandemic, which has created loads of new opportunities for companies to take advantage of.
That’s why we’ve put together a list of stocks below that can help investors to capitalize on some of the fascinating changes we are seeing in consumer finance. Let’s take a deeper look below.
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Buy now, pay later services are here to stay, and Affirm Holdings is at the head of the pack. The company, which provides a platform for digital and mobile commerce, has already inked several high-profile deals with massive retailers like Amazon and Target that will allow shoppers to take advantage of the ability to pay for a purchase over time through installments. Consumers are attracted to this payment option over traditional credit cards as it helps them to get a loan with little or no interest, take advantage of a quick and stress-free approval process, and keep up with payments in a very convenient way.
Since companies like Affirm can help people make discretionary purchases without getting into mountains of debt, it has the chance to make a huge impact on the consumer finance industry. Investors certainly recognize the potential in a company like Affirm, as the stock has rallied over 44% year-to-date and is close to taking out its all-time highs. Affirm reported total revenue of $870.5 million, up 71% year-over-year, in the fiscal year 2021, and saw its active merchants grow by 412% in Q4 to reach nearly 29,000. The bottom line here is that consumers are seeking out buy now, pay later options from merchants, which could mean big things for Affirm Holdings going forward.
Companies like SoFi Technologies stand out thanks to their value proposition as a “one-stop-shop for consumer finances”. The company has developed a financial services platform that allows its members to borrow, save, spend, invest and protect their money all in one place. While the convenience of being able to manage your financial life with one company is certainly attractive, there are also some intriguing member benefits from SoFi including personalized career advice, experiences and events, and an unemployment protection program that really make this fintech company stand out.
The stock is currently rallying thanks to Morgan Stanley analyst Betsy Graseck who initiated coverage with a $25 price target and noted the company’s strength in its student loan financing business. SoFi has experienced 8 consecutive quarters of accelerating member growth and reported record adjusted net revenue of $237 million in Q2, representing 74% year-over-year growth. It’s clear that the company has created something unique that could change the way consumers handle all of their finances going forward, which certainly makes it a stock to watch going forward.
This disruptive consumer lending company is leveraging artificial intelligence to change the way that people get personal loans, which is a big reason why it should be on investors’ shopping lists. Upstart Holdings provides AI models to bank partners within a consumer-facing cloud application that streamlines the end-to-end process of originating and servicing a loan. Consumers can access affordable credit quickly using the platform, and banks are attracted to it since it can reduce the risk and costs of lending for them.
Upstart stock has been a massive winner since reporting a massive Q2 earnings beat last quarter, but there could be even more upside in store for the company going forward. Keep in mind that stimulus measures are winding down which could lead to more people seeking loans. The company is also getting into the auto loan business, which could be another growth driver that sends shares higher in the coming weeks. While the valuation here is sky-high, it’s safe to say that Upstart Holdings is a company that is changing consumer finance and has immense upside potential, making it one of the top growth stocks on the market.