Nasdaq AAPL Apple

The Federal Reserve's latest 75-basis-point interest rate hike sent another shockwave through the stock market, ramping up worries among investors about inflation and possible recession.

In early trading on Tuesday, shares of Home Depot topped the list of the day's best performing Dow Jones Industrial Average components, trading up 2.5%. Year to date, Home Depot has lost about 34.2% of its value.

Wall Street's main indexes rose for the first time in six sessions on Tuesday, with megacap growth stocks doing most of the heavy lifting following a bruising selloff on worries of a rate-hike induced economic slowdown.

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Even if you believe that we can still move lower, the previous low is a natural point at which to deploy some money. If you are a big tech investor and that is what you intend to do, where should that money go?

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Wall Street was headed for a higher open on Tuesday after five sessions of relentless selling on worries of a rate-hike induced economic slowdown, which saw its main indexes slip deeper into a bear market.

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Investors are bracing for more trouble as the aggressive rate hikes by the Federal Reserve to tame inflation are expected to push the U.S. economy into recession. The S&P 500  (SPX) and NASDAQ 100 (NDX) have declined 23.3% and over 31% year-to-date, respectively. While many tech stocks have been clobbered this year, Apple's (NASDAQ:AAPL) stock has shown some amount of resilience and is down 15% year-to-date. Most Wall Street analysts remain bullish about the tech giant based on its strong track record, continued innovation, and progress into new growth areas like fintech.

Apple is Well-Positioned for Long-Term Growth

Apple’s Q3 Fiscal 2022 (ended June 30, 2022) revenue increased 1.9% to nearly $83 billion, but earnings per share fell 8% to $1.20. That said, the company managed to top analysts’ expectations for both key metrics.

While Apple cautioned investors about near-term pressures, including currency headwinds and supply chain woes, it expects revenue growth to accelerate in the September quarter compared to the June quarter.

Meanwhile, Apple is diversifying its manufacturing footprint amid production disruptions in China. Apple recently announced that it would be manufacturing the iPhone 14 in India. The company has been manufacturing old models of iPhones in India but this time it is going ahead with the production of a newly launched device. The move is expected to boost Apple’s prospects in a lucrative market like India.

Additionally, Apple continues to deepen customer engagement with its services business, which includes sales from Applecare, advertising, cloud, payment, and other services. Note that the company’s services business is more profitable than its products segment. The company has been advancing in the attractive financial services market through solutions like Apple Pay and Apple Wallet.

Back in June, Apple announced that it will launch a buy now, pay later service called Apple Pay Later. The facility will allow customers to split their purchase into four equal payments that can be spread over six weeks. Earlier this year, Apple rolled out its Tap to Pay on iPhone feature that enables contactless payments.  

Is Apple a Buy or Sell Now?

In a recent research note to investors, Wedbush Securities analyst Daniel Ives noted that the iPhone 14 is likely witnessing “brisk sales” as wait times are getting longer. The analyst stated, "Wait times on many iPhone Pro 14 models are now 4-6 weeks for Apple customers and lengthening into November." Ives stated that the overall demand for Pro is 8% to 10% ahead of his expectations.

The analyst also sees strong sales in China, mainly via e-commerce channels. He expects China's business to be a vital factor in Apple’s growth story and estimates that nearly 30% of iPhone customers in China “are in the window of an upgrade opportunity.”

Despite macro pressures, Ives believes that Apple’s growth story “remains a bright spot in the tech landscape with darker clouds abound in many pockets of consumer tech.” Ives reiterated a Buy rating on AAPL stock with a price target of $220.

All in all, Apple scores the Street’s Strong Buy consensus rating based on 23 Buys, four Holds, and one Sell rating. The average Apple price target of $183.45 suggests nearly 22% upside potential from current levels.  

Conclusion

Despite macro pressures, Apple seems to be an attractive pick for the long haul based on strengths like continued innovation, solid growth potential for the services business, and strong execution.

Apple scores a “Perfect 10” on TipRanks’ Smart Score System, indicating that the stock is likely to outperform the broader market.

Disclosure

U.S. stock index futures jumped about 1% on Tuesday, following a bruising selloff over the last few sessions on rate-hike induced recession fears that confirmed the Dow has been in a bear market for most of this year.

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Preorder trends suggest that Apple's (NASDAQ: AAPL) iPhone 14 lineup could turn out to be another successful smartphone flagship from the tech giant.

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U.S. stock index futures rebounded on Tuesday, following a bruising sell-off over the last few sessions on rate-hike induced recession fears that confirmed the Dow has been in a bear market for most of this year.

South Korean shares erased early losses on Tuesday as investors snapped up beaten-down stocks after four straight sessions of sharp falls. The Korean won strengthened, while the benchmark bond yield inched down.

Apple (AAPL) closed the most recent trading day at $150.77, moving +0.23% from the previous trading session. This change outpaced the S&P 500's 1.03% loss on the day. Meanwhile, the Dow lost 1.11%, and the Nasdaq, a tech-heavy index, lost 0.12%.

The fintech bubble may have burst as valuations in the tech scene fell back to Earth over the past year. With a recession on the horizon and higher interest rates likely to curb innovation spending, the road ahead seems extremely bumpy for the many ambitious fintech startups that strived to change the world. Instead, let's use TipRanks' Comparison Tool to evaluate three blue-chip behemoths that could take the fintech world by storm amid rising rates. Based on upside potential alone, MA stock looks the most promising.

Fintech hype got a bit ahead of itself last year, with firms like Block (NYSE: SQ) more than tripling since the start of the pandemic to its peak, only to crumble to depths not seen since the 2020 coronavirus crash. Though interest in investing in fintech may have dried up, I think the longer-term opportunity at hand is still in play.

In a post-2021 world with high interest rates, it's not the disruptive fintech startup that could take the financial world by storm. It's likely the well-established firms in the technology and financial industries. Indeed, various tech titans like Apple (NASDAQ: AAPL) have embraced finance and payments, with a slew of new services introduced over the past few years. Meanwhile, credit card behemoths like Visa (NYSE: V) and Mastercard (NYSE: MA) have also led the charge in fintech innovation.

With gushing cash flows and brilliant managers who know how to capture market share, it's the established blue chips that may be the new "hot" fintech stocks to own from here. As for the unprofitable fintech startups, many could struggle to cope with the harsher macro climate. Credit is about to get hard, and with a lack of profits, it could be challenging to stay on the cutting edge of financial innovation.

Now, without further ado, let's dive further into V, MA, and AAPL.

Visa (V)

Visa is a credit card company that we're all familiar with. It has a massive network that's proven tough to replicate. Despite recent headwinds, Visa's payments have held up far better than most would think. Visa's third-quarter numbers were much better than expected, with per-share earnings of $1.98, ahead of the $1.75 consensus estimate.

With a recession on the horizon, credit card payments could take a turn for the worst. Visa has been through recessions before, and they've been quite painful. Despite the headwinds, Visa looks poised to continue its growth. The company won't be sitting back, cutting away at costs, just hoping for the economic tides to turn. The company will be very busy enhancing its growth prospects as its smaller fintech peers crumble.

If anything, a recession may help Visa gain strides and market share in the payments scene. Now, Visa is already the payments leader. However, it can still claw back business from the BNPL (Buy Now Pay Later) firms that have since gone bust.

Visa has the network and an ever-increasing number of perks to beckon young consumers back to its ecosystem. Undoubtedly, Visa may have been seen as vulnerable to the rise of fintech firms in 2021. Now, it's Visa that looks far better than its peers, now that investors are re-focused on real profits and fundamentals and less on overly-ambitious growth stories.

What is the Price Target for V Stock?

Wall Street remains upbeat on Visa, with a "Strong Buy" consensus. The average V stock price target is $253.62, implying 40.4% upside potential. As fintech startups sink further with every rate hike, Visa stands to become that much more dominant in payments.

Mastercard (MA)

Mastercard is another credit card company that's embraced technology over the years. In prior pieces, I praised the company for its growth strategy outlined at its 2021 Investor Day meeting. Management is looking to invest big bucks in commerce, society, and technology. Investments in commerce appear to be investments in present-day fundamentals, while tech investments could be endeavors that beef up the firm's long-term share-taking capabilities.

Indeed, Mastercard's smaller fintech rivals have shown promise with their innovative capabilities. With rates rising, the case for owning such firms has lowered. Arguably, Mastercard has better innovative capabilities than the many "disruptive" fintech up-and-comers. Mastercard isn't just capable of disrupting its small "disruptors," but it's also able to leverage its massive network to kickstart growth in fintech innovations that a smaller competitor just cannot do.

At this juncture, Mastercard stands out as one of the better fintech plays for today's high-rate world. Even if rates come down in a few years, Mastercard may have already pulled far too ahead of the competition - if it hasn't already.

What is the Price Target for MA Stock?

For now, Mastercard is bracing for a downturn. Despite the tough road ahead, Wall Street continues to praise the stock, with a "Strong Buy" rating and with the average MA price target of $413.60 implying 42.6% upside potential.

Apple (AAPL)

Apple is a tech behemoth that's stealthily moved into the payment services space in recent years. The company's Apple Wallet and Apple Pay services have been embraced by its many consumers locked into its walled garden.

Though fintech services represent a relatively small slice of the overall revenue pie, Apple could be on the cusp of considerable share-taking in the payments space. The firm's "Pay in Four" installments business could easily pressure BNPL firms to their breaking point amid rising interest rates.

Further, Apple's "Tap to Pay" service could give it a huge growth runway in the point-of-sale (PoS) marketplace. Indeed, Apple seems to be going for digital and physical payments. With such a massive network of users at its side, Apple seems poised to become a fintech behemoth that's difficult to stack up against.

Apple's a disruptor at heart, and with rates on the rise, the company is in a great position to accelerate growth in the realm of fintech with its massive $48.2 billion cash hoard.

What is the Price Target for AAPL Stock?

Wall Street loves Apple, even in this bear market. The stock commands a "Strong Buy" consensus rating, with the average AAPL stock price target of $183.45 implying 21.7% upside potential.

Conclusion: An Opportunity in Fintech Awaits

The fintech bubble may have burst, but the long-term opportunity in the space is still up for grabs. As a recession and higher rates weigh heavily on smaller, less-profitable (or unprofitable) companies, I expect that blue-chip behemoths like Visa, Mastercard, and Apple will be ready to take share and make the most of the longer-lived fintech boom.

Disclosure

Wall Street slid deeper into a bear market on Monday, with the S&P 500 and Dow closing lower as investors fretted that the Federal Reserve's aggressive campaign against inflation could throw the U.S. economy into a sharp downturn.