ZACKS·2025-12-29 16:06Core Insights - The fintech sector is a transformative investment space merging finance and technology, encompassing services like online banking, peer-to-peer payments, insurance, cryptocurrency, and cybersecurity [2] Industry Overview - The performance of the fintech space is inversely related to interest rates, with low rates benefiting technological improvements and product innovation [3] - The expansion of mobile and broadband networks, along with advancements in AI and machine learning, positions fintech for significant growth in banking, payments, and investments [4] Investment Recommendations - Three fintech companies are recommended for investment to capitalize on the digital finance revolution by 2026: Robinhood Markets Inc. (HOOD), SoFi Technologies Inc. (SOFI), and Affirm Holdings Inc. (AFRM) [5] Company Analysis: Robinhood Markets Inc. (HOOD) - Robinhood operates a financial services platform allowing users to invest in various assets, including cryptocurrencies [8] - Increased retail participation is expected to improve HOOD's trading revenues, supported by solid trading activity and growth in net interest revenues [9] - HOOD is innovating rapidly with new products like Cortex and Legend, enhancing user engagement and expanding its financial services [12][13] - The company is expanding internationally, offering tokenized U.S. stocks and ETFs across 31 EU/EEA countries, which positions it for sustained profitability [14] - HOOD has an expected revenue growth rate of 21% and earnings growth rate of 16.2% for the next year, with a long-term EPS growth rate of 27.5% [15] Company Analysis: SoFi Technologies Inc. (SOFI) - SOFI leverages its online banking services and the Galileo platform to expand its market presence, benefiting from lower interest rates [16][17] - The company is well-positioned to capitalize on the digitalization trend in the financial sector, with a focus on innovation and strategic partnerships [19] - SOFI has an expected revenue growth rate of 25.3% and earnings growth rate of 62.1% for the next year, with a long-term EPS growth rate of 22.2% [21] Company Analysis: Affirm Holdings Inc. (AFRM) - Affirm's growth is supported by increasing GMV, adoption of Affirm Cards, and entry into high-growth verticals [22] - The company utilizes a cloud-native platform with machine learning for underwriting and customer service optimization [23] - Affirm is expanding into everyday spending categories and broadening its ecosystem beyond core BNPL offerings [24][26] - AFRM has an expected revenue growth rate of 26% and earnings growth rate of over 100% for the current year, with a long-term EPS growth rate of 22.3% [27][28]