5 Mid-Cap Financial Technology Stocks to Buy on Recent Fed Rate Cut

On Dec. 10, the Federal Reserve (Fed) reduced the benchmark interest rate by 25 basis points to the range of 3.5-3.75% in its FOMC meeting. With this, the central bank has lowered the Fed fund rate by 75 basis points in 2025 after a 1% cut in 2024. Moreover, the Fed has decided to buy $40 billion in Treasury Bill starting tomorrow. Consequently, yields on short-term government bonds fell immediately.

The performance of the financial technology (fintech) space is inversely related to the movement of interest rates. A low-interest-rate regime will be beneficial for this space as a higher interest rate significantly affects technological improvement and product innovation of fintech companies. 

Fintech's innovative nature positions it as a fascinating choice in the evolving financial landscape. With the expansion of mobile and broadband networks, fintech is poised for significant growth. The rise of artificial intelligence (AI) technologies and machine learning further revolutionizes banking, payments, and investments, offering efficient and secure financial solutions.

At this stage, we recommend investing in five mid-cap financial technology stocks with a favorable Zacks Rank. These are: EVERTEC Inc. EVTC, Enova International Inc. ENVA, LendingClub Corp. LC, OppFi Inc. OPFI and Bread Financial Holdings Inc. BFH. Each of our picks currently carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our five picks year to date.

EVERTEC Inc.

Zacks Rank #2 EVERTEC is engaged in the transaction processing business primarily in Latin America and the Caribbean. EVTC operates through divisions which consist of Merchant Acquiring Solutions, Payment Processing and Business Solutions. 

EVTC offers ATH network, payment processing, card products processing, electronic benefit transfer services, information technology services, database management services, printing center and document mailing, cash processing, business processes outsourcing services as well as payment solutions, point-of-sale systems and accessories to receive payments.

EVERTEC has an expected revenue and earnings growth rate of 5.3% and 4%, respectively, for next year. The Zacks Consensus Estimate for next year’s earnings has improved 0.8% over the last 30 days.

Enova International Inc.

Zacks Rank #2 Enova International is a provider of online financial services. ENVA offers loans to customers in the United States, the United Kingdom, Australia and Canada. ENVA’s customers include consumers who have bank accounts but use alternative financial credit services because of their limited access to more traditional consumer credit from banks, thrifts, credit card companies and other lenders.

Enova International has an expected revenue and earnings growth rate of 15.8% and 10.5%, respectively, for next year. The Zacks Consensus Estimate for next year’s earnings has improved 0.9% over the last 60 days.

LendingClub Corp.

Zacks Rank #1 LendingClub provides internet financial services. LC offers an online marketplace for loan approval, pricing, servicing and support operations as well as a regulatory and legal framework that connects borrowers and investors.

LC has an expected revenue and earnings growth rate of 13.2% and 35.7%, respectively, for next year. The Zacks Consensus Estimate for next year’s earnings has improved 16.4% over the last 60 days.

OppFi Inc.

Zacks Rank #1 OppFi provides a financial technology platform which powers banks to help everyday consumers gain access to credit. OPFI offers installment loans through OppLoans platform. It serves consumers who are turned away by mainstream options.

OPFI has an expected revenue and earnings growth rate of 9.1% and 8.6%, respectively, for next year. The Zacks Consensus Estimate for next year’s earnings has improved 15.5% over the last 60 days.

Bread Financial Holdings Inc.

Zacks Rank #2 Bread Financial Holdings is a tech-forward financial services company, offering simple, personalized payment, lending and saving solutions. BFH creates opportunities for customers and partners through digitally-enabled choices that offer ease, empowerment, financial flexibility and exceptional customer experiences.

BFH benefits from data-driven marketing strategies. Investment in strategic growth areas and the ramp-up of marketing spend in growth verticals and in digital innovation and technology drive growth. 

Partnerships and divestitures will aid BFH in growing inorganically and expanding its international footprint. BFH has a strong balance sheet supported by its solid cash position and lower debt.

Bread Financial Holdings has an expected revenue and earnings growth rate of 3.3% and -9.6%, respectively, for next year. The Zacks Consensus Estimate for next year’s earnings has improved 0.7% over the last 30 days.

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This article originally published on Zacks Investment Research (zacks.com).

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