On Wall Street, what goes up must come down, and vice versa.
A momentous week that saw a roller coaster of volatility in markets can be attributed to the seismic shifts since the election on Tuesday (November 5). So-called “Trump trades” assets tied to President-elect Donald Trump and those most likely to benefit from his administration rose after his victory.
Headed to november, the Fintech IPO Index It’s up about 15% year to date. This total return outpaced individual names that rose by high double-digit and even triple-digit percentage points.
It would be easy to suggest that the decline in gains is a matter of investors taking advantage of the rally following Wednesday and Thursday’s rocket fuel (along with the Fed). Reduce rate) which saw stocks rise to new highs.
However, a deeper dive into some of these largely digital startups’ earnings reports reveals that in business, especially with the digital transformation of financial services, nothing is straight. Growth can be, and often is, bumpy.
In early trading on Friday (November 8), shares rose in… Confirm Decreased by 7%. Shares in cocky It increased by 34%. Bell Holdings It was building on its post-earnings rally, adding 15%. Marketa It fell 2%, continuing a decline that wiped out more than a third of that company’s market value in a week. Flywire It was 10% higher. square Decline 7%.
Wall Street is crunching the numbers as ecosystems take shape
Part of the volatility can be attributed to the fact that earnings season is a game much like football, where it is won in inches. Minor revenue misses or beats versus consensus can cause a stock to rise or fall.
roadblockwhich was reported Profits Thursday (Nov. 7) after the close, net revenues totaled $5.98 billion in the third quarter, below the consensus of $6.2 billion. Marketa shares fell after the consolidation, valuing the company at $128 million Revenue It was below the consensus of $128.1 million. Conversely, Upstart’s rise came after the company took in a total of $162 million profit It beat Wall Street expectations for sales of $150 million.
Beyond the “success or failure” versus consensus, some common themes are beginning to emerge. Many companies are building ecosystems that include everything from cards to cryptocurrencies to loans, as evidenced by the likes of Block, MoneyLion And confirm. In the case of companies like BILL.com and Marqeta, the motivation has been to help digitally transform companies’ access to capital and payments, or modernize the card issuance and back-office operations of the companies themselves.
Cross-selling and retaining customer bases has been key, as repeat business leads to increased recurring revenue.
For example, Block observed a 15% improvement in retention for sellers who adopted the full suite of banking products (three or more) compared to sellers who did not. The company also provides capital to sellers, and merchants who received a loan use 3.7 square products on average compared to 1.5 products used by sellers who did not receive a loan.
elsewhere, Cash App Card The number of monthly active users increased by 11%.
confirmed double-digit growth in Transactions For every active user in the Buy Now Pay Later (BNPL) era that has seen increasing adoption in the US, the UK has attracted interest and investment from the company, having just launched there.
MoneyLion’s Profits The results demonstrate cross-selling success across different platform products that include, for example, cards, cash advances, and tax preparation.
Bill investor deck It observed “expanding network effects” across its target base of SMEs, buyers and suppliers, with 89% of its revenue coming from existing customers.
There are also challenges
Beyond the vagaries of alignment, consensus, or overcoming consensus, there are still some challenges facing the digital transformation of financial services.
Marketa’s results are a portent here. The company expected fourth-quarter revenue growth of 10% to 12%. The consensus was about 17%. Growth is still growing, but the slowdown has worried at least some investors. As CEO of Marketa Simon Khalaf The slowdown comes “in the past year, the regulatory environment has changed among small banks that support many of our client programs,” he said on an earnings call.
Later during the call, the CFO Mike Milotic “We have been less efficient in working with our bank partners to launch new programs, which we attribute to increased regulatory scrutiny over the past few quarters on the banking industry, particularly smaller banks that support fintech and blended finance,” he said.
Regulators are issuing approval orders and intensifying their examination of third-party relationships, the administration said on the call. There is a healthy backlog in place, but it will take time to deal with that backlog.
