FinTech IPO Index Braces for Further Turbulence as Q1 Earnings Season Kicks Off

At some point, with the FinTech IPO Index down nearly 27% year to date, one wonders where the bottom is.

We may still have a leg downward, if earnings season is as bumpy as initial signs indicate.

Thus far, only a few days into the actual earnings reports, and with a shortened trading week, we haven’t seen any earnings reports yet from our crop of more than three dozen names that have IPO’ed since just before the pandemic.

But the commentary that’s come from the big banks — bellwethers of financial services, of course — gives one pause.

After all, the same trends that impact, say JPMorgan, and Citi and others offer a read across for the digital-only upstarts in our FinTech universe.

PYMNTS.com

Waiting for the Earnings Reports

The read across, at least thus far, is that the consumer continues to spend. In our coverage of JPMorgan Chase, for example, we noted that the company had been beefing up its loan loss reserves, despite quarter after quarter of releasing (as other banks had done) those reserves into earnings. When companies take those reserves, it means they are girding for some turbulence, for credit to go south a bit, for delinquencies to tick, or even surge, upward.

Read more: JPMorgan Adds $1B+ to Loan Loss Reserves as Economic Threats Mount

However, even though card and debit spending volumes were up more than 20% in JPMorgan’s most recent quarter, management (including CEO Jamie Dimon) were cautious about what comes next, at least on the macro stage.

The less-than-stellar sentiment, and news that retail spending was up only 50 basis points in March, while inflation gained more than 8% annually, helped send the great bulk — roughly 30 — of our IPO names in the red for the past week.

Of the few firms that showed gains, Opendoor stands out, having popped 18% in the past week. The company continues to gain ground on the heels of its announcement earlier in the month that it has been expanding throughout New Jersey and New York.  The housing market is still strong, which by extension may continue to support the firm’s platform model.

On the flip side of the equation, we saw double digit percentage losses in names such as SoFi, which dipped 15% on the week.

The slide continues after the company cut its earnings guidance for the rest of 2022 as the Biden administration extended the moratorium on federal student loan payments.  The extension will result in about $80 million shaved from the company’s top line this year, and about $100 million in EBITDA will be lost too.

Upstart was off more than 12% this past week, possibly on concerns over what happens this time around with consumer credit and the increasing difficulties of living paycheck to paycheck.  PYMNTS’ own recent data notes that 62% of the U.S. population is indeed living paycheck to paycheck — as many as 50% of consumers making more than $100,000 annually do, and 80% of consumers making less than $50,000 annually live paycheck to paycheck.

See also: 50% of Consumers Earning $100K Now Living Paycheck to Paycheck