These 2 Fintech Stocks Are Back in the Money

The stock market has been resilient in 2023, proving its ability to bounce back from adversity in 2022. Even when stocks have started days with losses, as they did on Wednesday, they have often found a way to recover by the end of the trading session.

The Nasdaq Composite (^IXIC -1.49%) performed the best among major market indexes, rising nearly 1%, but even the broader S&P 500 (^GSPC -1.11%) and the Dow Jones Industrial Average (^DJI -0.77%) climbed back to post gains.

Data source: Yahoo! Finance.

Among various industries, fintech stocks have been under pressure for more than a year, as adverse trends have hit this high-growth sector hard. But on Wednesday, shares of both credit scoring pioneer Upstart Holdings (UPST -5.62%) and cryptocurrency exchange giant Coinbase Global (COIN -3.17%) moved sharply higher, regaining lost ground. Here's what happened with Upstart and Coinbase to justify higher stock prices.

Upstart starts back upward

Shares of Upstart jumped 28% on Wednesday. The artificial intelligence-driven credit-scoring and lending marketplace provider reported fourth-quarter financial results late Tuesday that reassured some investors about the company's prospects.

To be clear, Upstart's fourth-quarter numbers were pretty ugly. Revenue of $147 million was down by more than half year over year, reflecting the poor environment for lending, especially on the personal-loan side of the business. Transaction volumes were down 62% from year-ago levels to about 154,500 loans, and conversion rates fell from 24% 12 months ago to just 11% in the most recent quarter. Upstart posted an adjusted loss of $0.25 per share, reversing a year-earlier profit.

Moreover, Upstart expects continued pressure on its financials. It projected revenue for the first quarter to come in at about $100 million, with adjusted net losses amounting to $70 million.

Yet CEO Dave Girouard believes that Upstart's advanced technology, improved modeling to take advantage of AI, and more-diverse data set that now incorporates some periods of economic slowdown have put it in a better position for 2023 and beyond. Shareholders seem to agree, and the stock has now risen 75% from its lows even though it remains far below its highest levels from the past couple of years.

Coinbase rides the crypto wave

Meanwhile, shares of Coinbase Global finished up 17% for the day. The cryptocurrency exchange won't release its financial results until next week, but it got some good news from the crypto markets and noted that it is in good position to deal with the latest developments in the industry.

Coinbase does tend to do well when the cryptocurrency markets perform well, and a big rise in the price of key digital assets of between 5% and 10% helped the exchange provider's prospects. Strong crypto markets tend to spur more activity from exchange customers, and Coinbase's revenue is directly linked to levels of trading activity.

In addition, Coinbase revealed that it believes it already complies with a recent proposal from the U.S. Securities and Exchange Commission (SEC) to impose new rules on qualified custodians for digital assets.

In general, the SEC wants to ensure that custodians hold assets in a way that insulates customers from losses if the entity files for bankruptcy protection or becomes insolvent.

Crypto investors are still dealing with other threats, such as possible regulations that would limit crypto staking practices. Nevertheless, Coinbase shareholders see the long crypto winter potentially thawing, and that's good news for the industry as a whole.