Allocators in the volatile small-cap and micro-cap space often benefit from stocks trading at steep discounts to existing operations, simply because investors cannot look past their unprofitability to fully comprehend their established and growing market positions.
This phenomenon is especially notable with leading-edge technologies, whose markets have yet to build track records long enough to demonstrate reliable value creation. Fintech is a key example, with its long list of nascent innovations unlocking potential across the industry.
Two fintech sub-sectors with extreme upside – financial education, and cryptocurrency and blockchain technology – are only beginning the climb in their growth trajectories, backed by generational tailwinds set to revolutionize how humans spend and save money, and companies keen to capitalize on these tailwinds by filling in market gaps. Here are three picks worth considering:
Bitcoin Well
First up, Bitcoin Well (TSXV:BTCW), which operates a Bitcoin ATM network and online portal designed to bring modern banking convenience to the cryptocurrency. Current features beyond buying and selling include paying bills, dollar-cost average investing and buying gift cards, with more soon to follow.
Given Bitcoin’s US$1.3 trillion market cap, 21,000 per cent growth since 2015 to over US$68,000, recent splash in the ETF market, and the network’s ability to execute transactions across the globe with no financial middleman, it is safe to assume that the cryptocurrency is filling an unmet need. Data from Statista supports this thesis, extending it to the industry at large, with growth forecasted at an 8.62 per cent CAGR from US$51.5 billion in 2024 to US$71.7 billion in 2028.
Despite Bitcoin Well’s 412.50 per cent return year-over-year, its 51.19 per cent loss since inception in 2021 indicates that shareholders are underappreciating crypto’s presence in the economy by staying on the sidelines. All we have to do is look at how the industry’s current market cap of US$2.6 trillion earns it third place among the world’s largest stocks, while being roughly equivalent to all the U.S. dollars in circulation, to understand how inextricably embedded digital assets are in the global financial system.
With Bitcoin online portal revenue up by 59 per cent from Q3 to Q4 2023, and unique users up by 368 per cent since Q2 2022 to 10,990, on top of fresh financing in Sept. 2023 and consistent gross profitability, there is nothing stopping Bitcoin Well from growing market share and fulfilling its mission of becoming a Bitcoin super company, where numerous subsidiaries specialize in different use-cases like remittances, sports betting and currency transactions.
Adam O’Brien, Bitcoin Well’s founder and chief executive officer, joined Stockhouse’s Ryan Dhillon this week to shed light on the company’s new loyalty program, Bitcoin Jackpot Contest, and collaboration with popular Bitcoin news and talk show, Simply Bitcoin.
Continue your due diligence by reading Bitcoin Well’s latest investor presentation.
Hank Payments
Hank Payments (TSXV:HANK) is a fintech company helping businesses and consumers build more value-accretive budget and payment systems. The company’s products are diversified across auto, rental real estate, education, lending, fintech and financial advice, with about 300,000 consumer accounts on its platform producing a 91 per cent gross margin on recurring fees.
Hank posted 27 per cent year-over-year revenue growth last quarter and expects to become cash and adjusted EBITDA-positive by the end of 2024, as new partnerships with the likes of FinWise Bank and a growing number of colleges are set to add to its approximately US$1 billion in managed balances.
The company, at its essence, is an antidote to how 4 in 10 U.S. citizens can’t cover a US$400 expense, and how only 6 in 10 own stocks. Its services are stemming the losses incurred from a lack of personal financial education across the U.S. school system, and ushering billions in capital off the sidelines by spreading the good word about how to make your money work for you.
With the stock sitting at an 89.39 per cent loss since inception in 2021, and the company actively breaking through finance’s perceived complexity, it’s hard to see Hank as anything but undervalued.
Mike Hilmer, Hank Payments’ chief executive officer, spoke with Stockhouse’s Brieanna McCutcheon about the company’s new customer origination deal with FinWise Bank, which represents a new source of revenue from customer deposits.
Continue your research by reading Hank Payments’ latest investor presentation.
Banxa Holdings
Our last, but not least, fintech stock pick for the week is Banxa Holdings (TSXV:BNXA), an infrastructure company embedding crypto and blockchain technology into client platforms to do business in the new digital asset and Web 3.0 economies, where users don’t depend on intermediary companies to make payments, take out loans, start businesses or establish trust among counterparties.
Banxa’s plan of action is that of Bitcoin Well, but from an institutional angle, acting as the rails for businesses that recognize the value of embracing crypto and blockchain through payment facilitation, NFT commerce, token listings and enabling fiat payments in smart contract protocols.
The company’s low fees and high conversion rates have seen it process billions in transactions since coming on the scene in 2014, as most recently highlighted by a 63 per cent increase in transaction volume to C$242 million in Q2 FY2024, up from C$149 million in Q2 FY2023, thanks to organic growth and new partnerships.
The importance of the crypto economy, which now includes some 580 million people, is now impossible to ignore because of the independence its underlying blockchain networks – which have spawned tens of thousands of applications – offer everyday people who might otherwise be excluded from traditional financial institutions. And Banxa finds itself positioned to guide crypto’s growth with a suite of tools that demystify the space and optimize its revenue potential.
The company grew its own revenue by 10x from AUD$7.99 million in 2019 to AUD$80.35 million in 2023, with gross profitability growing by 10x as well to AUD$17.23 million, and recently achieved positive adjusted EBITDA in Jan. 2024, a trend it sees a good chance of continuing through the year.
Holger Arians, Banxa’s chairman and chief executive officer, spoke with Stockhouse’s Brieanna McCutcheon about the company’s 2024 guidance, which bodes well for the stock to improve on its modest 20 per cent return since 2018.
Learn more about Banxa Holdings by reading its latest investor presentation.
Join the discussion: Find out what everybody’s saying about these fintech companies on the Bitcoin Well, Hank Payments and Banxa Holdings Bullboards, and check out Stockhouse’s stock forums and message boards.
This is sponsored content issued on behalf of Bitcoin Well, Hank Payments and Banxa Holdings, please see full disclaimer here.