The stock market had an excellent year in 2023, but there are still some excellent long-term opportunities available. That's especially true in the financial technology, or fintech, industry.
If you have a few thousand dollars to invest, here are two fintech stocks that could be excellent long-term investments. One has rapid growth momentum and the other has an extremely cheap valuation.
A game-changing bank stock with tons of room to grow
SoFi (SOFI +1.33%) certainly isn't the first online bank, the first app-based brokerage, or the first personal lender. The difference between SoFi and the other companies in those categories is that the others tend to be used in conjunction with traditional banks.
SoFi, on the other hand, has enjoyed more success as a bank replacement than any of its peers. It aims to be its customers' only bank, providing all the financial services they need.
NASDAQ: SOFI
Key Data Points
The business momentum has been spectacular. The company grew its membership base at a 47% year-over-year rate in the most recent quarter, and customers added more than 1 million new products (like a checking or brokerage account), the highest one-quarter total ever.
SoFi's deposit base has grown from literally nothing at the beginning of 2022, when it received its banking license, to $15.7 billion. Management has said -- and has reiterated -- that it will achieve GAAP profitability for the first time when it reports its fourth-quarter earnings in a few weeks.
The bank could potentially keep its growth trajectory going for years to come. It's the fastest-growing U.S. bank in its class and is currently the 80th largest bank in the country. As more people join SoFi's ecosystem, the more the network effect will fuel its growth.
A dirt cheap fintech leader that investors shouldn't ignore
PayPal's (PYPL +0.46%) stock hasn't received a lot of love from investors and analysts recently. And there are some good reasons why. The company's growth slowed significantly after the pandemic-fueled surge, and management conceded that its previous growth targets were (to put it mildly) unrealistic.
NASDAQ: PYPL
Key Data Points
However, there's still a lot to like about this business. For starters, it's not as if growth has disappeared. The number of active accounts has fallen by about 1% over the past year as PayPal chose to focus on its most engaged customers, but this strategy is paying off.
Despite the lower account total, PayPal's total payment volume increased 15% year over year in the most recent quarter, and the company generated 8% revenue growth as a result. This business could still have plenty of room for long-term user growth once the churn from low-engagement accounts that were added in recent years plays out.
Additionally, PayPal's business is an absolute cash machine. It generates more than $5 billion in annualized free cash flow, and the company is putting most of it into share buybacks -- a good indicator that management thinks the stock is cheap. I agree. This proven fintech winner trades for just 11.5 times forward earnings estimates.
Will these two stocks make you rich in 10 years?
Nobody has a crystal ball that can predict which stocks could make you rich. But these two could make it happen. SoFi is still a small bank and has tremendous momentum. PayPal has tons of optionality and is too cheap to ignore.
There's a lot of execution risk here. In other words, there's a lot that needs to go right for these stocks to deliver multibagger returns over the next decade. But I've added both to my own stock portfolio and think long-term investors will be handsomely rewarded for their patience.
