Assessing the global FinTech market in a note this week, Citi analysts considered whether the valuation/stock recovery can be accelerated.
The firm highlighted that many FinTech stocks continue to underperform even while delivering on their operating performance commitments. They note that two-thirds of the FinTech companies they covered pre-pandemic are below their pre-pandemic high.
Citi describes the mostly SMID stocks as 'orphan stocks,' given their struggle for attention and limited market sponsorship.
"A majority of our covered FinTech stocks outperformed in 2023 (first time since 2019), so presumably there is a slow-and-steady path out of the quandary," said the firm. "The interesting question is whether external actions can accelerate this path."
Overall, Citi feels that some names may exhibit the needed characteristics to make them exciting to more public and private investors. In addition, they believe that "tuck-in M&A can help with some of the needed clean-out and some names might not make it...but big deals may have to wait."