Financial technology, or fintech, has completely transformed the financial sector's operations. While the fintech industry’s long-term prospects look bright, not all stocks can capitalize on the industry tailwinds.
While there are plenty of fintech stocks one could invest in, avoiding fundamentally weak fintech stocks, Marathon Digital Holdings, Inc. (MARA), Bit Digital, Inc. (BTBT), and Argo Blockchain plc (ARBK) could be wise.
Before delving deeper into the fundamentals of these stocks, let’s discuss why the fintech industry is well-positioned for growth.
Although the fintech industry grew even before the pandemic, the lockdown restrictions helped the industry grow exponentially. With the proliferation of the Internet, fintech companies have been able to provide essential financial services to consumers at their fingertips.
Fintech companies are leveraging new technologies like blockchain, machine learning, artificial intelligence, and big data analytics to offer more efficient and customer-centric solutions. According to a Boston Consulting Group (BCG) and QED Investors’ report, fintech revenues are projected to grow sixfold from $245 billion to $1.5 trillion by 2030.
Despite the industry’s growth prospects, the featured fintech stocks are likely to be under pressure due to their exposure to cryptocurrency and fundamental weakness.
Let’s take a closer look at their fundamentals.
Marathon Digital Holdings, Inc. (MARA)
MARA is a digital asset technology company focused primarily on mining cryptocurrencies in the blockchain ecosystem and operated as a digital asset generator in the U.S.
In terms of forward Price/Sales, MARA’s 3.58x is 35.5% higher than the 2.64x industry average. Its 5.01x forward EV/Sales is 85.4% higher than the 2.70x industry average. Likewise, its 25.90x forward EV/EBIT is 50% higher than the 17.27x industry average.
MARA’s total revenues for the first quarter ended March 31, 2023, declined marginally year-over-year to $51.13 million. Its operating loss narrowed 73.5% year-over-year to $3.86 million. Its net loss narrowed 43.7% over the prior-year quarter to $7.24 million. In addition, its loss per share came in at $0.05, compared to a loss per share of $0.12 in the prior-year quarter.
Analysts expect MARA’s EPS for the quarter ending June 30, 2023, to remain negative. It failed to surpass Street EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has declined 29.3% to close the last trading session at $9.11.
MARA’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Within the D-rated Financial Services (Enterprise) industry, it is ranked #98 out of 102 stocks. It has an F grade for Value and Stability and a D for Sentiment and Quality. Click here to see the other ratings of MARA for Growth and Momentum.
Bit Digital, Inc. (BTBT)
BTBT is engaged in the Bitcoin mining business. It is also involved in treasury management activities, digital asset staking, digital asset mining businesses, and Ethereum staking activities.
In terms of forward Price/Sales, BTBT’s 5.76x is 118% higher than the 2.64x industry average. Likewise, its 5.10x forward EV/Sales is 88.6% higher than the 2.70x industry average.
For the fiscal year ended December 31, 2022, BTBT’s revenues declined 66.4% year-over-year to $32.30 million. Its net loss widened significantly year-over-year to $105.30 million. Its loss per share widened considerably year-over-year to $1.34.
Analysts expect BTBT’s EPS for the quarter ended March 31, 2023, to remain negative. Its revenue during the same quarter is expected to decline 12.5% year-over-year to $7.50 million. It failed to surpass the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 54.7% to close the last trading session at $2.49.
BTBT’s POWR Ratings reflect this bleak outlook. It has an overall rating of F, which translates to a Strong Sell in our proprietary rating system.
It has an F grade for Value, Stability, and Quality and a D for Sentiment. It is ranked #101 in the same industry. To see the other ratings of BTBT for Growth and Momentum, click here.
Argo Blockchain plc (ARBK)
Headquartered in London, the United Kingdom, ARBK engages in the bitcoin and other cryptocurrency mining business worldwide. It engages in mining purpose-built computers for complex cryptographic algorithms.
In terms of forward EV/EBITDA, ARBK’s 44.46x is 219.5% higher than the 13.92x industry average. Its 3.84x trailing-12-month Price/Book is 34.2% higher than the 2.86x industry average.
ARBK’s gross loss for the fiscal year ended December 31, 2022, came in at £34.46 million ($42.53 million), compared to a gross profit of £53.65 million ($66.21 million) in the prior-year period. Its net loss came in at £194.23 million ($239.69 million), compared to a net income of £30.77 million ($37.97 million). Its adjusted EBITDA declined 98.2% year-over-year to £979 thousand ($1.21 million).
For the quarter ended March 31, 2023, ARBK’s EPS is expected to be negative. Its revenue for the same quarter is expected to decline 43% year-over-year to $11.07 million. Over the past year, the stock has declined 80.2% to close the last trading session at $1.16.
The POWR Ratings of ARBK mirror the unfavorable forecast. It has an overall rating of F, which translates to a Strong Sell in our proprietary rating system.
Within the Financial Services (Enterprise) industry, it is ranked #97. It has an F grade for Quality and a D for Value and Sentiment. Click here to see the other ratings of ARBK for Growth, Momentum, and Stability.
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MARA shares were trading at $9.29 per share on Friday morning, up $0.18 (+1.98%). Year-to-date, MARA has gained 171.64%, versus a 9.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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