Fintech's prospects are bright, given the increasing adoption of digital financial products. Fintech stocks are not all able to capitalize on industry tailwinds. It may be prudent to avoid the fundamentally weak fintech stock Marathon Digital (MARA), Bit Digital(BTBT) and Argo Blockchain(ARBK). Read more ....
Fintech has revolutionized the way financial services are conducted. Fintech's prospects are bright for the long term, but not all stocks will benefit from the tailwinds.
There are many fintech stocks that one can invest in, but if you want to avoid investing in weaker fintech stocks, then Marathon Digital Holdings, Inc., Bit Digital, Inc., and Argo Blockchain plc, (ARBK), could be a good choice.
Let's first discuss the reasons why the fintech sector is poised for growth.
The fintech industry was growing even before the pandemic. However, the lockdown restrictions have helped it grow exponentially. Fintech companies are able to offer essential financial services at the fingertips of consumers thanks to the Internet's proliferation.
Fintech companies use new technologies such as blockchain, machine-learning, artificial intelligence and big data analytics in order to provide more efficient and customer centric solutions. Fintech revenues will grow sixfold by 2030, from $245 billion up to $1.5 trillion according to a report by Boston Consulting Group and QED Investors.
Fintech stocks will be pressured despite the growth prospects of the industry due to their exposure and weakness to cryptocurrency.
Take a look at the fundamentals.
Marathon Digital Holdings, Inc.
MARA, a digital assets technology company, is focused on mining cryptocurrency in the blockchain ecosystem. It also operates as a digital assets generator in the U.S.
MARA's forward Price/Sales of 3.58x is 35.5% greater than the industry average 2.64x. The 5.01x EV/Sales forward is 85.4% more than the 2.70x average in the industry. Its 25.90x EV/EBIT forward is 50% more than the industry average of 17.27x.
MARA's first-quarter revenues, ending March 31, 2023, decreased marginally from the previous year to $51.13 millions. The operating loss decreased by 73.5% over the previous year to $3.86million. The net loss was down 43.7% from the previous quarter, to $7.24million. Its loss per share was $0.05, as opposed to $0.12 for the previous quarter.
Analysts predict that MARA's earnings per share (EPS) for the quarter ending 30 June 2023 will remain negative. In three of the last four quarters, it failed to exceed Street EPS expectations. In the past nine-month period, the stock price has fallen 29.3%. It closed the last trading day at $9.11.
The POWR ratings of MARA reflect its weak fundamentals. Our proprietary rating system gives the stock an overall F, which is equivalent to a Strong Sell. The POWR ratings are calculated using 118 factors. Each factor is weighted optimally.
It is ranked #98 of 102 stocks in the D-rated Financial Services Enterprise industry. It is rated F for Value and Stability, and D for Sentiment & Quality. Click here to view the other ratings for MARA Growth and Momentum.
Bit Digital, Inc.
BTBT is involved in Bitcoin mining. The company is also engaged in digital asset mining, digital asset staking and Ethereum stake activities.
BTBT has a 5.76x forward price/sales ratio, which is 118% more than the industry average of 2.64x. Its 5.10x forward EV/Sales ratio is 88.6% more than the industry average of 2.70x.
BTBT reported a 66.4% decline in revenues for the fiscal year ending December 31, 2022. This equates to $32.30 millions. The net loss of BTBT increased significantly from the previous year to $105.30 millions. The loss per share increased by a significant amount year-over-year, to $1.34.
Analysts expect BTBT to continue losing money in the next quarter, ending March 31, 2023. Analysts expect its revenue to drop 12.5% from the previous year to $7.50million. In each of the four previous quarters, it failed to exceed the consensus EPS estimate. In the past nine-month period, the stock gained 54.7% and closed the last trading day at $2.49.
BTBT's PoWR Ratings reflect the bleak outlook. Its overall rating is F, which in our proprietary system translates into a Strong Sale.
It receives an F for Value, Stability and Quality, and a D grade for Sentiment. It is ranked #101 in the same sector. Click here to see the other ratings for BTBT Growth and Momentum.
Argo Blockchain plc (ARBK)
ARBK is a bitcoin and cryptocurrency mining company with its headquarters in London, United Kingdom. It mines complex cryptographic algorithms on purpose-built computers.
ARBK's forward EV/EBITDA is 44.46x, which is 219.5% more than the industry average of 13.92x. The 3.84x price/book trailing 12-month is 34.2% more than the 2.86x average industry.
ARBK's loss gross for the fiscal period ended December 31, 2020 was PS34.46 ($42.53) million, compared to PS53.65 ($66.21) million in the previous year. The net loss was PS194.23 ($239.69) million, compared to an income of PS30.77 ($37.97). Its adjusted EBITDA fell 98.2% from the previous year to PS979 thousand ($1.21million).
ARBK is expecting a negative EPS for the quarter ending March 31, 2023. The revenue is expected to drop by 43% on a year-over-year basis to $11.07 millions. The stock price has dropped 80.2% in the past year to $1.16 at the close of the last trading day.
ARBK's POWR ratings reflect the negative forecast. Its overall rating is F, which in our proprietary system translates into a Strong Sale.
It is ranked #97 in the Financial Services (Enterprise). It is rated F for Quality, and D for Value and Sentiment. Click here to view the other ARBK ratings for Growth, Momentum and Stability.
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MARA shares traded at $9.29 on Friday morning. This was up $0.18 (+1.98%). MARA shares have risen 171.64% year-to-date compared to the 9.96% increase in the benchmark S&P 500 Index during the same time period.
About the Author: Dipanjan B.
Dipanjan has been interested in stock markets since he was in elementary school. Dipanjan obtained a Master's Degree in Finance and Accountancy. Dipanjan is a financial journalist and investment analyst. He has a keen interest in reading about and analyzing new trends in the financial markets.