Two months into this year, S&P 500 Index Not much has changed. While inflation remains above desirable, the U.S. economy has proven resilient. But the good news failed to move the market.
At times like this, it’s important to remember Benjamin Graham’s famous quote: “In the short term, the market is a voting machine. But in the long term, it’s a weighing machine.” If you pick quality stocks and hold them for the long term, it won’t matter what happens in the first two months of 2026.
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Let’s take a look at the long-term prospects of two fintech stocks Wall Street is buzzing about today: clogged(NYSE: XYZ) and Pagya Technology(NASDAQ: PGY). Wall Street expects Block’s stock price to rise 65% and Pagaya’s stock price to rise 195% in the next 12 to 18 months.
Image source: Getty Images.
Block has attracted market attention for its innovative financial products and services since its days as Square. Its Square seller business provides an advanced digital platform that simplifies financial management and is one of the most popular platforms for merchants to process payments. It also built a popular personal financial management platform called Cash App, which remains one of the most popular options.
But over the past few years, it’s run into problems that fall into two broad categories: a failure to improve profitability and a shift toward tangential services that don’t support the two main platforms. As a result, the company lost support from the market, and the stock, which was once up 1,500% and looked like the next big winner, is now down about 80% from its highs.
Is this oversold? The company is cheaply valued at 1.7 times trailing 12-month sales and 19 times next year’s earnings, but that’s a deep discount only if the market is convinced the company can change its trajectory. It has been trying to do so for several years without success.
The stock did gain after last week’s fourth-quarter earnings report. Sales were slightly higher than the previous year, and operating income and profit margins improved significantly.
The market mainly celebrated the company’s announcement of layoffs, from 10,000 to 6,000 employees. This gives you a sense of how bloated the company has been thus far.
It is adding more artificial intelligence (AI) to its systems to increase efficiency, but at the same time, it is one of the software-as-a-service companies that the market fears may become irrelevant because AI may be able to do the same jobs it does.
There are risks there, as well as continued dependence on Bitcoin. Cryptocurrencies have been declining, dragging down Block’s total fourth-quarter revenue.
There are also general risks associated with betting on a troubled company’s recovery. So while it may be oversold at this price and worth buying now, it doesn’t prove to be a solid long-term bet.
Pagaya uses a sophisticated platform to assess creditworthiness, approve loans at higher interest rates and sell asset-backed securities to institutional investors. It is growing rapidly. Fourth-quarter revenue increased by 20% year-on-year, and net profit reached US$34 million, exceeding expectations by US$25 million.
It operates in five different credit segments, including personal loans and car loans. It has 30 lending partners, including big names such as U.S. BankThe fifth-largest U.S. bank by assets, and visaand has over 150 financial backers. The company recently announced a new $800 million round of financing for its loans, which is important to ensure there are no hiccups as it expands.
If Block looks cheap today, Pagaya is dirt cheap, with a price-to-sales ratio of just 0.8 and a forward one-year price-to-earnings ratio of 3.8. There are several reasons why the market is currently pricing it low and why the stock plummeted following its fourth-quarter earnings release.
One of them is near-term pressure from its single-family rental (SFR) property operations. It acquired Darwin, a rental technology and management company to complement its AI-based model. The troubled real estate market has weighed on the segment, and while web traffic grew a mediocre 3% year-over-year in the fourth quarter, it would have grown 34% without SFR.
Another reason for the share price decline is the disappointing outlook for 2026, which means revenue and network numbers will only grow 15%, hardly a compelling fintech growth story.
At this price, all 10 analysts covering Pagaya rate the stock as a Buy, with the lowest price target roughly 80% higher than today’s price.
Before buying Block stock, consider the following factors:
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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Block, US Bancorp and Visa. The Motley Fool recommends Pagaya Technologies. The Motley Fool has a disclosure policy.
Two stocks could soar 65% and 195% next year, The Wall Street reports Originally published by The Motley Fool
