Fintech Bargains Worth Considering: Two Stocks Down 88% and 90%

The fintech sector has faced significant headwinds in recent years. Post-pandemic market dynamics have deflated earlier optimism about rapid financial system transformation. Yet emerging opportunities exist, particularly as central banks worldwide pivot toward interest rate cuts. With technological advancement continuing and transaction volumes on digital platforms expanding, selective opportunities may reward patient investors.

Brazil’s Payment Processor: A Deep Discount Play

StoneCo (NASDAQ: STNE) operates as a Brazil-focused financial services provider, processing payments for small and medium-sized enterprises while offering retail management software solutions. The company’s 2018 IPO sparked significant enthusiasm, with shares climbing to $94.09 in early 2021 amid favorable growth conditions and strong payment and credit performance.

Pandemic-related challenges in Brazil proved severe. The firm’s reliance on unreliable government datasets for credit assessments resulted in substantial losses and temporary suspension of its credit operations. Today, shares trade near $11—representing an 88% decline from peak valuations.

Yet recent performance suggests stabilization and opportunity. Second-quarter total payment volume grew 25% year-over-year, accompanied by higher transaction fees. Non-GAAP adjusted net income jumped 54% year-over-year, signaling operational improvement.

The valuation appears compelling: approximately 9.5 times forward earnings and under 1.5 times projected revenue. The concentration in Brazil introduces macroeconomic volatility, but presents an upside angle. Non-cash payment adoption and e-commerce penetration remain far less developed in Brazil compared to U.S. markets. Companies successfully capturing this transition could generate substantial shareholder returns.

For risk-tolerant international investors, StoneCo represents a potential long-term opportunity as Brazil’s financial infrastructure modernizes.

The Loan Origination Platform Awaiting Rate Cuts

Upstart Holdings (NASDAQ: UPST) achieved meteoric gains following its December 2020 IPO, delivering triple-digit returns before collapsing as rising interest rates devastated its business model. The firm originates consumer loans using proprietary artificial intelligence to assess borrower creditworthiness—a methodology management claims outperforms traditional FICO scoring by expanding qualified applicant pools.

As a lending-centric business, Upstart remains acutely sensitive to interest rate movements. Recent Federal Reserve policy decisions—including a 50 basis point cut with expectations for additional reductions—create a tailwind for loan demand. The company has strategically expanded, now offering home equity lines of credit in nearly half of U.S. states, enabling access to this substantial home equity loan market segment. Cost reduction through workforce optimization should further enhance profitability as borrowing resurges.

During recent earnings discussions, company leadership emphasized that declining rates are “unambiguously good for the business,” improving both borrowing appetite and approval rates. Though recent quarters have shown stalled momentum, technological capabilities remain solid. With shares down over 90% from historical peaks, meaningful upside potential emerges if the lender successfully captures renewed demand.

Key Considerations

Both opportunities reflect significant downside risk alongside potential recovery scenarios. StoneCo’s geographic concentration and Upstart’s rate sensitivity introduce substantial volatility. Investors should carefully assess risk tolerance before committing capital to deeply discounted fintech positions, particularly those with recent operational challenges or business model dependencies on macroeconomic variables.