COVID-19 pandemic-led restrictions fueled the growth of several fintech companies over the last 18 months. However, as the economy gradually recovers and traditional banks continue ramping up their technology and product offerings, the fintech space may face stiff competition. So, we think it could be wise to avoid fintech stocks Affirm (AFRM), SoFi Technologies (SOFI), and Futu Holdings (NASDAQ:FUTU) for now because they are trading at lofty valuations. Read on.The COVID-19 pandemic ushered in several changes in the way we live, work, and transact finance. The pandemic accelerated consumers’ digital adoption, which could otherwise have taken years to develop. Most fintech companies rose to the challenge amid the pandemic by delivering secure, seamless, and fully digital financial services to consumers at a negligible cost.
Although the Fintech space has benefited dramatically since the onset of the pandemic, it faces intense competition from traditional banks. According to BankDirector’s 2021 Technology Survey, banks have increased their technology spending by a median of 10%. Also, investor pessimism concerning the fintech space is evident in the Global X FinTech ETF’s (FINX) 16.5% loss over the past month.
Given this backdrop, we think it could be wise to avoid fintech stocks Affirm Holdings, Inc. (AFRM), SoFi Technologies, Inc. (SOFI), and Futu Holdings Limited (FUTU). They look overvalued at the current price level.