Wells Fargo says buy these three fintech stocks, sees $1.5 trillion revenue opportunity

Published Tue, Apr 5 20226:43 AM EDT

The fintech market could see big growth in the near future, and Wells Fargo highlighted some companies that stand to benefit from it. Analyst Jeff Cantwell initiated coverage of Block , PayPal and Shopify with overweight ratings, saying in a Monday note to clients that the fintech and payments sector will "expand significantly" over the next decade. "We're launching global coverage of the Payments & Fintech sector with a bullish stance," Cantwell said. "We see a $1.5 trillion annual revenue opportunity for Fintech companies globally, and expect 6% annual growth over the ensuing decade." Rapidly accelerating trends in digitization of payments, the shift of business tools online and the consolidation of vendors will drive growth in the sector, the analyst said. Other factors that will boost the industry is the growth of "fintech-as-a-service" technologies and the rise of cryptocurrencies. Wells Fargo also said that improving fundamentals are yet to be reflected in company valuations. The correction in PayPal — which has tumbled more than 30% this year — is overdone, according to Wells Fargo. The firm initiated PayPal with a $152 target price, implying upside of 30% upside from current levels. Other analysts recently initiated coverage on payment stocks, including Goldman Sachs, which recently advised investors to buy the dip on PayPal. Meanwhile, Block will continue to gain share with its Square and Cash App, Wells Fargo said, noting they were also interested in the company's cryptocurrency aspirations. Wells started coverage of Block with a price target of $165 per share, implying 23% upside from here. Block shares have struggled this year, dropping more than 36% through Monday's close. As for Shopify, Wells said it has a more "palatable" valuation after falling nearly 47% this year. The company was given a $834 target price, meaning it has 20% upside. Shopify is considered a player in the fintech space given its merchant checkout platform. "Now is a highly opportune time for investors to take a fresh look at Fintech given current valuations," Cantwell wrote. "We expect that these companies' fundamentals will strengthen in '22/'23 and that the group's current discount to the broader market will not hold." —CNBC's Michael Bloom contributed to this report.

Paypal CEO Dan Schulman (C) celebrates with employees during the company's re-listing on the Nasdaq in New York, July 20, 2015.

Lucas Jackson | Reuters

The fintech market could see big growth in the near future, and Wells Fargo highlighted some companies that stand to benefit from it.