Get Ahead of the January Effect With These 2 Fintech Stocks

Key Points

• Robinhood saw triple-digit YoY growth metrics in November 2024, as equity trading volumes rose 178% and crypto trading volume rose 8x YoY. 
• Robinhood’s CEO suggested they may add sports betting to its platform through events contracts similar to its successful 2024 presidential election betting.
• SoFi's one-stop shop for financial services has become profitable. It has proven itself sticky as existing members did 32% of new product additions, and 20% of new members added a second product within 30 days.  

As 2024 concludes, investors await the Santa Claus rally lifting stocks in the last week of December and the January effect to kick in the following month. The January effect occurs when investors buy back into the market after taking their tax losses and selling their underperforming stocks to offset capital gains from cashing in on their winners. The net effect can be a sustained market rally throughout January. However, history is no guarantee of future results. Nonetheless, here are two financial technology stocks in the computer and technology sector to buy now for a potential January effect next month.

Robinhood Markets: Stocks, Options and Crypto Trading and Sports Betting?

One of the greatest comeback stories of 2024 is the recovery of the digital brokerage platform Robinhood Markets Inc. NASDAQ: HOOD. Its shares are up 215% as of Dec. 13, 2024, driven by higher trading volumes and the rise of bitcoin. The company also added events contract trading for the 2024 Presidential election, where users could bet on the winner of the election for the first time on a brokerage app.

Parlaying on the wild success of the events contract, CEO Vlad Tenev suggested that the fintech may look to expand into sports betting. This sent shares of digital sportsbooks like DraftKings Inc. NASDAQ: DKNG, Flutter Entertainment plc NYSE: FLUT, and Penn Entertainment Inc. NASDAQ: PENN lower on concerns of losing market share. However, betting wouldn’t be as intricate as sportsbooks; instead, it would offer simple event contracts similar to presidential election event contracts.

Average Revenue Per User Surges 36% YoY in Q3

Robinhood reported its third-quarter 2024 EPS of 17 cents, missing analyst estimates by a penny. Revenues surged 36.4% YoY to $637 million, falling short of the $660.53 million consensus estimates. Its Assets Under Custody (AUC) rose 76% YoY to $152.2 billion, driven by net deposits and appreciating equity and crypto valuations.

Net deposits rose 29% relative to AUC to $10 billion. Average revenue per user (ARPU) surged 36% YoY to $105, which indicates more trading activity with its customers. Robinhood Gold subscribers increased 65% YoY to 860,000. Monthly active users (MAUs) rose 7% YoY to 11 million.

November Stats Surge Triple Digits YoY

In November, Robinhood saw equity notional trading volumes surge 178.1% YoY to $147.1 billion. Crypto notional trading volumes rose 6x from October and 8x from the year-ago period to $35.2 billion. AUC rose 106% YoY to $195 billion. Net deposits in November had a 42% annualized growth rate compared to October 2024. Margin balances rose 100% YoY to $6.8 billion. Total securities lending revenue rose 109% YoY to $23 million.

SoFi: The Fintech That’s Harnessing Generational Customers

SoFi Technologies Inc. NASDAQ: SOFI embraces the concept of generational customers and the network effect. The company offers student loans for kids entering college. It continues to introduce them to new financial services, from checking and savings, investing, wealth management, personal loans, and credit cards to auto loan refinancing and mortgages. As students progress and start their careers, SoFi aims to be embedded as the go-to solution throughout their financial lives.

The platform is meant to be sticky as users try new services and features. This is illustrated by the double-digit growth of new products that are being added by members. New product additions rose 31% YoY, adding 1.1 million in Q3 2024 to a total of 13.7 million products being used by members. Financial Service products rose 33% YoY to 11.8 million, and Lending Products rose 19% YoY to 1.9 million. The model is working out as the company has turned profitable.

Breaking Records Illustrating Durable Growth

In its third quarter of 2024, Sofi reported EPS of 5 cents, beating analyst estimates by a penny. Net income was $61 million. Revenues surged 30% YoY to $697.1 million, crushing consensus analyst estimates of $631.59 million. Membership grew 35% YoY, adding 756,000 in Q3 to 9.4 million. Its combined growth for Financial Services and Tech Platform segments rose 64% YoY, growing to 49% of total revenue. SoFi reported $174 million in capital light, fee-based revenue.

SoFi Issues Upside Full Year 2024 Guidance

SoFi issued upside guidance for full year 2024 EPS of 11 cents to 12 cents, versus 10 cents consensus estimates. In the full year 2024, revenue is expected to be between $2.54 billion and $2.55 billion versus the consensus estimates of $2.46 billion.

SoFi CEO Anthony Noto commented, “Our one-stop shop continues to attract great cross-buying behavior by our members. In fact, 32% of new products were opened by existing SoFi members, and 20% of our new members opened a second product in their first 30 days. This is the power of the flywheel we have developed. In our Tech Platform, we reached over 160 million total accounts. That's up 17% year-over-year.”