The financial sector is one of the fundamental pillars of society. According to general industry estimates, financials account for up to a quarter of the global economy.
Modern card issuer Marqueta (QM 3.95%) is just a small dot in the financial universe, but it may not always be so – the company’s innovative and flexible technology makes it a potential titan in the making. Here’s why this might be one of the best stock ideas in this bear market.
A huge opportunity for decades to come
Not only is banking and finance one of the largest industries in the world, it is also one of the oldest, dating back centuries. The financial sector was built without technology, long before the advent of computers.
But technology has a way of seeping into old, stagnant industries and fintech, or fintech, is one of the hottest sectors on Wall Street. Fintech is giving consumers new ways to pay, transfer, borrow and manage money.
Allied Market Research estimates that the global fintech market is worth around $110 billion, but could grow an average of 20% per year to reach $698 billion by 2030.
Think about the size of the global financial sector. Estimates put the global financial sector at $22.5 trillion, with expectations of single-digit growth in the coming years. This is a general trend likely to continue for decades.
How Marqueta can help you benefit
Deciding how best to invest in a large opportunity can be difficult, but this is where Marqeta can benefit investors. A modern card issuer provides software tools to help fintech companies connect to the existing financial system.
Traditional payments work like a cash advance: you swipe a credit card, which will approve you for the transaction amount, and your billing statement will only show you that you spent $X at merchant Y. But Marqeta allows businesses to create custom payment technologies that can be much more flexible.
For example, grocery delivery company Instacart uses Marqeta to monitor when, where, and how much its customers are allowed to spend to ensure they only buy what they are supposed to for customer orders. This type of control would not be possible with a traditional payment card.
These sophisticated technologies regularly seep into everyday life, from buying groceries via Instacart, ordering food via DoorDash“Buy now, pay later” with To affirmand peer-to-peer payments with To block.
Luckily, you don’t have to try to choose which companies will become the tech titans of the future, because Marqeta powers many of these companies.
Shareholders can benefit from Marqeta’s client growth because the company charges a percentage on every transaction it handles, meaning it earns when its clients do. The company’s revenue increased 54% year over year in the first quarter of 2022 and is $575 million in the last four quarters; Marqueta’s story is far from over.
Did I mention that Marqeta shares are a bargain?
However, Marqeta will have to prove itself over time, even if the business model seems convincing. But getting a stock deal could help sweeten the pot.
Marqeta went public last summer, a few months before the market peaked and began its fall. Marqeta has fallen around 75% from its peak, falling to a price-to-sales (P/S) ratio of just over 8.
To underscore how cheap Marqeta has become, the company has $1.6 billion in cash while the market value of the stock is $4.5 billion. This means that a whopping 35% of Marqeta’s value is now in cash. By way of comparison, only 2.5% of You’re hereThe market value of is in cash today.
Marqeta is not yet profitable and free cash flow is negative. However, with just $10 million in cash burnt in the past year, Marqeta is doing well with the $1.6 billion she has for her immediate needs. Marqeta could be on the verge of strong long-term returns if its customers continue to thrive.