The inflation figures higher than expected published last week showed that the aggressive interest rate hikes decided by the Fed are not yet effective. The consumer price index (CPI) rose 0.4% sequentially in September, beating the Dow Jones estimate of 0.3%. Over 12 months, inflation increased by 8.2%.
Even excluding food and energy prices, already inflated by supply shortages due to geopolitical and macroeconomic uncertainties, core inflation rose by 6.6% year-on-year in September, the most sharp increase over 12 months since August 1982.
This appears to have paved the way for the Fed’s reaction with another rate of 75 basis points rise next month, making debt even more expensive for businesses. Although a rising rate environment affects most sectors, it benefits financial companies as they generate more interest income.
Given that interest rates are expected to rise further, investing in fundamentally strong and growing financial stocks Group Holdings Corp. (CURO) might be wise. However, PayPal Holdings, Inc. (PYPL) might be best avoided now as it is not well positioned to take advantage of rising interest rates.
Stock to buy:
CURO Group Holdings Corp. (CURO)
CURO is a consumer finance company leveraging its technology to serve non-preferred customers in Canada. The Company operates through Canada Direct Lending and Canada POS Lending segments.
On October 4, 2022, Flexiti Financial Inc., a leading point-of-sale consumer finance solution for retailers and a subsidiary of CURO, today announced that it has increased its warehouse credit facility renewable from C$500 million ($360.18 million) to C$535 million ($385.39 million) and extended its maturity.
According to Peter Kalen, Founder and CEO of Flexiti, this renewed warehouse would expand banking relationships and reduce the cost of funds while demonstrating investor confidence in Flexiti’s business model and growth opportunities.
For the second quarter of fiscal 2022 ended June 30, CURO’s net revenue increased 22.7% year-over-year to $174.86 million. The company’s total assets were $2.68 billion as of June 30, 2022, compared to $2.46 billion as of December 31, 2021.
Analysts expect CURO revenue for the fourth quarter of fiscal 2022 (ending December 31) to increase 7.7% year-over-year to $241.69 million. Additionally, the company’s revenue for the current year is expected to increase 29.5% year-over-year to $1.06 billion.
Additionally, analysts expect the company’s revenue and EPS for next year to grow 6% and 938% year-on-year to $1.12 billion, respectively. and $2.05.
CURO stock is down 30.6% over the past month to close the last trading session at $4.06.
CURO has an overall POWR rating of B, which translates to a buy in our proprietary rating system. The POWR Rankings are calculated by considering 118 different factors, each factor being weighted to an optimal degree.
CURO also has a B rating for growth. It is ranked No. 6 among 49 stocks in the Consumer Financial Services industry.
For additional assessments on value, stability, sentiment, quality, and momentum for CURO, please Click here.
Stock to avoid:
PayPal Holdings, Inc. (PYPL)
PYPL enables digital payment and commerce experiences for merchants around the world as a technology platform. Its brands include PayPal, Braintree, Venmo, Xoom, Zettle, Hyperwallet, Honey, Happy Returns by PayPal, Chargehound, Paidy and Simility.
On October 11, 2022, PYPL announced the launch of the PayPal Zettle Terminal, its all-in-one point-of-sale solution for small businesses in the United States. However, given the bleak near-term outlook for the United States and the global economy affecting small businesses more severely, this launch is unlikely to have a material and positive impact on business performance in the future. predictable.
During the second quarter of fiscal 2022 ended June 30, 2022, PYPL’s non-GAAP operating income decreased 21.3% year-on-year to $1.3 billion. The company’s non-GAAP net income also fell 20.8% from a year earlier to $1.08 billion in the same period. It translated to $0.93 per share on an adjusted basis, down 19.1% year over year.
Analysts expect PYPL’s EPS for the third quarter of fiscal 2022 (ending September 2022) to decline 13.1% year-over-year to $0.96. Additionally, the company’s fiscal 2022 EPS is expected to decline 14.6% year-over-year to $3.93.
The stock has fallen 16.6% in the past month and 58.7% since the start of the year to close the last trading session at $80.47.
PYPL’s POWR ratings are consistent with its poor performance and bleak outlook. It has an overall D rating, equivalent to a sell in our proprietary rating system. It also has a D rating for Momentum. PYPL is ranked No. 39 out of 49 stocks in the same sector.
In addition to the above, we also rated PYPL on other metrics, such as growth, value, stability, sentiment, and quality. Click here to see all the ratings for PYPL.
Shares of PYPL rose $0.09 (+0.11%) in after-hours trading on Monday. Year-to-date, the PYPL is down -55.11%, compared to a -21.87% rise in the benchmark S&P 500 over the same period.
About the Author: Santanu Roy
Fascinated by the traditional and evolving factors that influence investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to moving into investment research, he was a process associate at Cognizant. With a master’s degree in business administration and a fundamental approach to business analysis, he aims to help retail investors identify the best long-term investment opportunities. After…