Banking is a strict industry. Money is given to borrowers through an assessment of their cash income and their assets, with the bank bringing in interest rates determined by the quality of the position — and these facts have not changed that much.
But there are two stocks are are bringing fresh technology and innovation to the industry and they are worth a look for anyone wanting to own growing stocks in the sector.
Upstart is a completely digital loan platform that allows its borrowers to get money through its platform, and then gives the loan to its banking partners. It also gives a programming interface to banks, allowing their systems to integrate with Upstart’s credit decision tech. AI is at the firm’s core, and the numbers speak for themselves: Upstart says its model gives 173% more approvals with the same loss rate as normal banks.
The technology calculates on over 1,000 data points, including metrics such as the borrower’s education level and their job history.
The company is profitable, which is a rare thing for a young tech company operating in a complex industry. The negative is that investors are handing over a good sized premium for the stock given what we know.
With a $9 billion value at recent prices, the company sells for 15 times projected revenue, but if the firm keeps growing at its current speed, it might begin to look very cheap for investors who have a five- to 10-year outlook. Analysts anticipate Upstart will bring in $800 million in revenue next year, and that would greatly shrink its price-to-sales multiple.
Paysafe had its IPO in late March through a deal with Foley Trasimene Acquisition, an SPAC. It is a payments company located in the U.K. that does much of its work outside of the United States, but with the rapidly increasing online gambling, that could be changing soon.
Paysafe owns Skrill, a digital wallet that recently went into crypto, and Neteller, which is a company that moves money between customers and merchants. Skrill recently announced their partnership with crypto heavyweight Coinbase, which is giving a white-label turn key solution to Skrill that allows its customer to purchase different cryptos.
The stock recently was priced at a $7.7 billion value, or 5 times sales, but it is also down by more than 40% since its high, so some investor exuberance has gone down. It could make for a good opportunity, given Paysafe expects the United States iGaming industry to expand to $47 billion by 2025, which is a 55% growth rate.
The company is well positioned to capture some of this growth, especially through their new partnership with Australian firm PointsBet Holdings — a $2.5 billion bookmaker that has a new focus on the large U.S. betting sector. Paysafe is moving its expertise in the global gambling industry to the U.S., and the timing could not be any better.
Author: Blake Ambrose