March 5, 2024

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Mizuhoanalyst Dan Dolev provided his 2024 FinTech & Payments outlook. The analysts top picks includedAffirm Holdings, IncAFRM ,Fidelity National Information Services, IncFIS ,Robinhood Markets, IncHOOD , andBlock, IncSQ .

Dolev noted that AFRM is more than just Buy Now Pay Later (BNPL). In his view, AFRM is an alternative payment network competing with the likes ofVisa IncV ,Mastercard IncMA , andPayPal Holdings, IncPYPL .

With the addition of the physical hybrid debit and credit card, Affirm has moved from a total addressable market (TAM) of primarily U.S. e-commerce (~$1 trillion) to a total TAM of U.S. retail, including brick and mortar, equating to ~$7 trillion.

Per Dolev, the Affirm Card is a revolutionary product in the payments industry.

Also, Affirms robust underwriting model, diverse funding channels, key enterprise partnerships, entrance into B2B BNPL, financing, and tailwinds from an improved rate outlook set it up to be an idiosyncratic winner into 2024.

Dolevs analysis of Affirms new transactional account with direct deposit (still in Beta testing), in tandem with the Affirm Card, could be the key to driving a significant increase in usage and adoption of Affirms financial products.

He sees a potential upside to Affirms medium-term GMV guidance of ~$50 billion. Dolev projected FY24 revenue of $2.24 billion versus consensus of $2.05 billion.

From an operational perspective, the analyst noted that Fidelity National Information Services (FIS) is more well-positioned now that the share-losing merchant acquiring business (Worldpay) has been divested.

He expected improved stability over time to be a vital feature of the FIS investment thesis.

Moreover, 2024 EPS is likely better than feared. His step-by-step walk of the FY23 FY24 EPS bridge showed that normalized earnings power could approach ~$5 in 2024.

Plus, he had increased confidence in RemainCo achieving the targeted 3-5% organic growth range over the medium term. Dolev projected FY24 revenue of $10.06 billion.

With an improving financial outlook for markets going into a potentially lower rate environment versus 20023, Dolev noted Robinhood as a significant benefactor.Loading… Loading…

He expected trading activity, mainly retail, to continue improving as market sentiment improves and expectations of rates coming down continue.

Robinhood continued to be a significant share leader in options, a share gainer in equities, and is maintaining and gaining a share in crypto, the analyst writes.

Dolev viewed Robinhood as one of the premier FinTechs in his space and it should capitalize on several new products, including retirement, credit cards, advanced trading, U.K. expansion, and potential Asia expansion. Dolev projected FY24 revenue of ~$2.03 billion, relatively in-line with the consensus.

According to Dolevs granular bottom-up models, Block could comfortably achieve 16%+ gross profit growth in 2024, and his builds should help the buy-side gain confidence in underwriting mid-teens growth over the medium term.

At Square (POS business), the analyst noted that the business can maintain its current capture rate of incremental V& MA US volume growth. At Cash App, he estimated that Block could add mid-single-digit million MAUs in 2024 and maintain recent product attach rates.

Together, this should help drive nearly $8.7 billion of gross profit, or +16% growth.

Dolev noted an upside to profits. Block guided to $2.4 billion of 2024 EBITDA, yet he stressed the company has additional room for cost takeout. Dolev projects FY24 revenue of $8.69 billion.

Price Action:AFRM shares traded lower by 2.27% at $40.08 on the last check Thursday.

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