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Data Snack: US fintech lenders down 30% on average in Q1 2022

  • Macroeconomic trends loom over the fintech sector and pressure public market stocks - most fintech lenders are down 30% or more in the first three months of 2022.
  • This could be a reaction against higher interest rates, which can grow the risk of defaults - driving investors to reevaluate fintech valuations, especially those with aggressive growth strategies.
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Data Snack: US fintech lenders down 30% on average in Q1 2022

US public-listed fintech lenders experienced a slump in the first quarter of this year, with share prices dropping by around 30% on a simple average basis. 

Looking at Tearsheet’s cohort of fintechs in the lending industry - Affirm, Dave, Lending Club, MoneyLion, PayPal, Oportun, Square and Upstart - the stock performance on the public markets seem to indicate a significant devaluation compared to the end of 2021. 

This trend is not isolated to the lending sector - fintech stocks have witnessed some serious valuation cuts over the past year as they face a bear market compared to a more generous 2021. 

One of the driving factors behind this has been rising interest rates, as the Fed seeks to react to inflationary pressures. Higher interest rates could grow the risk of rising default rates, which might have spooked investors. Moreover, as capital becomes more expensive, so does the funding for these fintechs – funding which many are relying on to pursue their aggressive growth strategies. 

publicly listed lenders Q1 2022

The largest drop was at Affirm, down 55% – it ended 2021 trading at around $100 and then dropped to $46.28 at March 31, 2022. The stock has been falling further since, trading at $31.76 per share as of May 4, 2022. 

Affirm is due to release its calendar Q1 results on May 12, and analysts expect a display of strength compared to 2021 results with year-on-year earnings growth of 25%. In the last round of earnings reports on February 10, the company missed estimates, which slashed a quarter off its stock price. 

PayPal has also been underperforming compared to the wider market, down 38% in the first quarter to trade at $115.65 per share on March 31, 2022. The company is one of the top 5 digital small business lenders in the US, just behind Square, with $1.8 billion of loans underwritten in 2021.

The company’s stock also suffered from a poor earnings season as fourth quarter results fell short of expectations.  PayPal CFO John Rainey pointed to a few factors driving a “more cautious” forecast – inflationary pressures, weaker consumer sentiment and decreased spending among lower-income consumers. 

Meanwhile, MoneyLion and LendingClub were both down around 34% in the quarter. 

MoneyLion shares hit their 52-week low $1.80 on March 14, also on the back of a higher-than-expected loss in the fourth quarter.

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