As its name implies, the Fidelity Crytpo Industry and Digital Payments ETF (FDIG) offers investors equity-based exposure to stocks with deep cryptocurrency ties.
With bitcoin and other digital assets recently slumping, it’s understandable that some investors aren’t flocking to bitcoin miners and the like, which are among FDIG’s 39 components. However, there’s more to the ETF’s story, and those chapters could be worth reading, particularly for investors seeking exposure to some beaten-up, discounted growth stocks.
Take the case of Block (NYSE:SQ). The company formerly known as Square is a marquee holding in a variety of fintech and crypto equity exchange traded funds, including FDIG. The newly minted Fidelity ETF allocates 14.59% of its weight to Block — one of the largest percentages among all ETFs.
At its investor day on Wednesday, Block noted that the Square platform could be a $120 billion gross profit opportunity over time and its Cash App digital wallet could be a $70 billion-plus opportunity. While Cash App offers customers bitcoin and equity trading services, its primary selling point has been its status as an alternative to traditional banks.
On that note, Cash App is a force to be reckoned with. Block’s investor deck indicates that it spends just $10 to acquire one Cash App customer. Conversely, neo banks spend anywhere from $30 to $50 while traditional brick-and-mortar banks spend $300 to $600. In other words, Cash App enjoys significant long-term cost advantages over rivals, and that has nothing to do with crypto.
Separately, a couple of other payments titans are drawing praise on Wall Street. On Wednesday, Goldman Sachs analyst Will Nance initiated coverage of Mastercard (NYSE:MA) and Visa with “buy” ratings.
“We are most constructive on V/MA, as we believe these businesses are under-earning given cross-border revenues are on recovery trajectories but still depressed, which along with higher inflation should provide an idiosyncratic growth impulse and a partial offset to any macro weakness,” Nance wrote in a note to clients.
Nance’s price targets on Mastercard and Visa imply upside of 35% and 38%, respectively, from the May 17 close. He’s slightly more constructive on Dow component Visa.
“Between the two, we are incrementally more constructive on Visa, and are adding the stock to the Conviction List, as we believe V’s greater US exposure could insulate it from a choppier macro environment,” Nance added.
This is relevant to investors considering Fidelity’s FDIG because the fund allocates nearly 5% of its weight to those two stocks.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.