Despite negative investor sentiment hitting global banking shares following this week’s collapse of Silicon Valley Bank, the latest financial results from Nuvei, SentinelOne, and StoneCo indicate that fintech and the financial services industry are withstanding strong macroeconomic headwinds.
– Nuvei, SentinelOne and StoneCo report robust revenue growth.
– Nuvei is past the worst of crypto-related headwinds; SentinelOne expects spending on cybersecurity to remain a priority.
– The Global X Fintech ETF, which holds Nuvei and StoneCo, is up 3.7% year-to-date.
As earnings season winds down, Nuvei [NVEI], SentinelOne [S] and StoneCo [STNE] have delivered their fourth quarter (Q4) results. The three companies have exposure to both the fintech and the financial services industries.
Canadian payments platform Nuvei got the ball rolling last week. Revenue was up 4% year-over-year to $220.3m, missing the $221.8m expected by analysts polled by Refinitiv. However, adjusted earnings per share were $0.47 versus expectations of $0.43 per share.
Reporting after the market closed on Tuesday, 14 March, cybersecurity firm SentinelOne beat both top-and bottom-line estimates: earnings per share of -$0.13 on revenue of $126.1m versus -$0.16 on $124.7m as expected by analysts, according to Benzinga.
Brazilian fintech StoneCo, which also reported on Tuesday, posted revenue growth of 44.5% while swinging to an adjusted net profit from a loss in the previous quarter
The Nuvei share price has jumped 60.9% year-to-date and is up 25% in the past week alone. The SentinelOne share price is down 0.8% year-to-date and down 13.1% in the past month. The StoneCo share price is down 3.7% and down 6.9% in the respective periods.
Strong growth amid challenging macro environment
Despite Nuvei’s top-line beat in the October to December period, revenue growth had been “impacted unfavourably by changes in foreign currency exchange rates year-over-year and volatility from digital assets and cryptocurrencies", the Canadian fintech firm said in its earnings release.
Revenue excluding digital assets and crypto was up 26% year-over-year to $209.6m from $165.7m in Q4 2021. Guidance for fiscal 2023 is for revenue, excluding digital assets and crypto, to grow between 23% and 28%.
SentinelOne enjoyed strong customer growth, adding 750 new customers in its fourth quarter, up approximately 50% from the year-ago quarter. The number of customers bringing in annual recurring revenue of $100,000 or more was up 74% to 905.
There was also “ extremely strong” retention and expansion among existing customers, “proving resilient despite tight macroeconomic conditions”. Net retention revenue was up 130% year-over-year, well above the company’s long-term target of 120%.
StoneCo’s revenue growth was mostly down to a 49.3% jump in sales from its financial services platform. The company has been working hard to extend its offering to banking services, helping legacy banks to upgrade outdated systems.
"The fourth quarter consolidated a major turnaround that our business had over 2022," StoneCo's chief strategy officer Lia Matos told Reuters.
Well-positioned to navigate headwinds
Nuvei’s robust Q4 performance was cheered by Credit Suisse analysts, who upgraded the stock from ‘neutral’ to ‘outperform’. In a note to clients, they argued that Nuvei should be past the “bulk of the cryptocurrency-related headwinds”. The bank had previously downgraded the stock to ‘neutral’ last July in light of the challenging macro backdrop. The new price target on Nuvei’s shares is $45, implying an upside of 10.1% from the most recent closing price of $40.89.
Macro-related uncertainties, however, could impact enterprise spending. SentinelOne is expecting cybersecurity to remain “a top IT priority, driven by a fervent and evolving threat landscape”. Revenue growth is expected to be 75% in Q1 2024 and 51% for the full fiscal year at the mid-way point.
A new CEO will take the helm at StoneCo this month. Pedro Zinner “has more than 25 years of experience in leadership, strategy, risk management and finance, and he will bring a powerful vision to drive the next phase of value creation for our business”, outgoing CEO Thiago Piau said in a statement.
Funds in focus: the Global X Fintech ETF
Both Nuvei and StoneCo are held by the Global X Fintech ETF [FINX], with weightings of 0.93% and 0.89%, respectively, as of Tuesday. The fund is up 3.7% year-to-date, though down 9% in the past month.
StoneCo has been allocated 1.95% of the SoFi Gig Economy ETF [GIGE] as of Wednesday. The fund is up 15.8% year-to-date, though down 8.7% in the past month.
SentinelOne is held by several major cybersecurity-focused funds. The stock makes up 3.15% of the Global X Cybersecurity ETF [BUG] as of Tuesday, which is up 6.7% year-to-date and down 5.1% in the past month.