Finance
Fintechs are 2024’s biggest gainers among financials
Jason Wilk
Source: Jason Wilk
Jason Wilk, the CEO of digital banking service Dave, remembers the absolute low point in his brief career as head of a publicly-traded firm.
It was June 2023, and shares of his company had recently dipped below $5 apiece. Desperate to keep Dave afloat, Wilk found himself at a Los Angeles conference for micro-cap stocks, where he pitched investors on tiny $5,000 stakes in his firm.
“I’m not going to lie, this was probably the hardest time of my life,” Wilk told CNBC. “To go from being a $5 billion company to $50 million in 12 months, it was so freaking hard.”
But in the months that followed, Dave turned profitable and consistently topped Wall Street analyst expectations for revenue and profit. Now, Wilk’s company is the top gainer for 2024 among U.S. financial stocks, with a 934% year-to-date surge through Thursday.
The fintech firm, which makes money by extending small loans to cash-strapped Americans, is emblematic of a larger shift that’s still in its early stages, according to JMP Securities analyst Devin Ryan.
Investors had dumped high-flying fintech companies in 2022 as a wave of unprofitable firms like Dave went public via special purpose acquisition companies. The environment turned suddenly, from rewarding growth at any cost to deep skepticism of how money-losing firms would navigate rising interest rates as the Federal Reserve battled inflation.
Now, with the Fed easing rates, investors have rushed back into financial firms of all sizes, including alternative asset managers like KKR and credit card companies like American Express, the top performers among financial stocks this year with market caps of at least $100 billion and $200 billion, respectively.
Big investment banks including Goldman Sachs, the top gainer among the six largest U.S. banks, have also surged this year on hope for a rebound in Wall Street deals activity.
Dave, a fintech firm taking on big banks like JPMorgan Chase, is a standout stock this year.
But it’s fintech firms like Dave and Robinhood, the commission-free trading app, that are the most promising heading into next year, Ryan said.
Robinhood, whose shares have surged 190% this year, is the top gainer among financial firms with a market cap of at least $10 billion.
“Both Dave and Robinhood went from losing money to being incredibly profitable firms,” Ryan said. “They’ve gotten their house in order by growing their revenues at an accelerating rate while managing expenses at the same time.”
While Ryan views valuations for investment banks and alternative asset manages as approaching “stretched” levels, he said that “fintechs still have a long way to run; they are early in their journey.”
Financials broadly had already begun benefitting from the Fed easing cycle when the election victory of Donald Trump last month intensified interest in the sector. Investors expect Trump will ease regulation and allow for more innovation with government appointments including ex-PayPal executive and Silicon Valley investor David Sacks as AI and crypto czar.
Those expectations have boosted the shares of entrenched players like JPMorgan Chase and Citigroup, but have had a greater impact on potential disruptors like Dave that could see even more upside from a looser regulatory environment.
Gas & groceries
Dave has built a niche among Americans underserved by traditional banks by offering fee-free checking and savings accounts.
It makes money mostly by extending small loans of around $180 each to help users “pay for gas and groceries” until their next paycheck, according to Wilk; Dave makes roughly $9 per loan on average.
Customers come out ahead by avoiding more expensive forms of credit from other institutions, including $35 overdraft fees charged by banks, he said. Dave, which is not a bank, but partners with one, does not charge late fees or interest on cash advances.
The company also offers a debit card, and interchange fees from transactions made by Dave customers will make up an increasing share of revenue, Wilk said.
While the fintech firm faces far less skepticism now than it did in mid-2023— of the seven analysts who track it, all rate the stock a “buy,” according to Factset — Wilk said the company still has more to prove.
“Our business is so much better now than we went public, but it’s still priced 60% below the IPO price,” he said. “Hopefully we can claw our way back.”
JPMorgan Chase CEO Jamie Dimon said Wednesday the looming tariffs that President Donald Trump is expected to slap on U.S. trading partners could be viewed positively.
Despite fears that the duties could spark a global trade war and reignite inflation domestically, the head of the largest U.S. bank by assets said they could protect American interests and bring trading partners back to the table for better deals for the country, if used correctly.
“If it’s a little inflationary, but it’s good for national security, so be it. I mean, get over it,” Dimon told CNBC’s Andrew Ross Sorkin during an interview at the World Economic Forum in Davos. “National security trumps a little bit more inflation.”
Since taking office Monday, Trump has been saber-rattling on tariffs, threatening Monday to impose levies on Mexico and Canada, then expanding the scope Tuesday to China and the European Union. The president told reporters that the EU is treating the U.S. “very, very badly” due to its large annual trade surplus. The U.S. last year ran a $214 billion deficit with the EU through November 2024.
Among the considerations are a 10% tariff on China and 25% on Canada and Mexico as the U.S. looks forward to a review on the tri-party agreement Trump negotiated during his first term. The U.S.-Mexico-Canada Trade Agreement is up for review in July 2026.
Dimon did not get into the details of Trump’s plans, but said it depends on how the duties are implemented. Trump has indicated the tariffs could take effect Feb. 1.
“I look at tariffs, they’re an economic tool, That’s it,” Dimon said. “They’re an economic weapon, depending on how you use it, why you use it, stuff like that. Tariffs are inflationary and not inflationary.”
Trump leveled broad-based tariffs during his first term, during which inflation ran below 2.5% each year. Despite the looming tariff threat, the U.S. dollar has drifted lower this week.
“Tariffs can change the dollar, but the most important thing is growth,” Dimon said.
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