Financial technology (FinTech) stocks saw a significant drop this week, as several companies reported yearly or quarterly revenue declines. As the FinTech IPO Stock Index decreased 4.1%, many investors were left wondering what caused shares to plummet.
Oportun, a leading alternative lender, tumbled 43%, after the company reported 35% revenue growth for the December quarter. Despite increased revenues, loan originations were lower year-over-year according to financial documents released by the company, likely causing the dip in stock price.
Katapult’s stock slid 31.2%. While gross originations increased 1.5%, total revenues were down 33.4%. Furthermore, impairment charges as a percentage of gross originations decreased 10 to 9%, signaling a potential lack of business confidence from lenders and investors alike.
Paysafe took a 20% hit after Binance announced it was halting cryptocurrency deposits and withdrawals for British customers. This comes shortly after both companies announced plans to expand their European operations together in October 2019.
Alkami dropped 15.2%, despite Kennebec Savings Bank launching the Alkami Digital Banking Platform earlier this month with improved digital banking capabilities intended to improve customer experience and increase loyalty among consumers.
Finally, Bill.com fell 4.6% after partnering with BMO to digitize and streamline business payments between businesses and individuals across different countries and regions around the world; while Opendoor Technologies rose 23.2%, with a 25% drop in sales quarter over quarter; Hippo Insurance gained 12.3%, after instituting a $50 million stock repurchase program earlier this week aimed at providing more liquidity for their shareholders.
The recent selloff of FinTech stocks has rattled some investors but analysts remain bullish on the sector overall as these companies continue to demonstrate sound fundamentals that could withstand any market turbulence that may come their way in 2020 and beyond..
With increasing competition, it is important for FinTech companies to differentiate themselves and continue innovating in order to remain competitive. Strong leadership, a sound business plan, sensible investments and strategic partnerships are key essential components of success in the industry. As investors gain more confidence, they will be more likely invest into these companies – leading to a revival of the FinTech IPO Index.
Ultimately, the future of FinTech is still unknown at this point. As investors remain vigilant in their decision-making process and these companies continue to innovate and differentiate themselves from competitors, it’s expected that we may see a rebound in the sector soon. That said, investors should keep an eye on the potential risks and rewards of investing in FinTech companies.
This week’s selloff has been largely attributed to internal issues at many of these companies such as higher-than-expected impairment charges or lower loan originations. But even with the recent drop, many analysts remain optimistic that the sector will continue to experience strong growth.
In order for these companies to succeed, they must focus on delivering long-term value and create innovative solutions that meet customer needs while continuing to drive revenue growth. With a sound business strategy and timely decision making, FinTech stocks could see a resurgence in the near future.