When it comes to tech stocks, mega-caps like Apple and Amazon tend to attract attention. Due to attractive products and exposure to the consumer space, one can understand this orientation.

However, this attention may come at the expense of lesser-known tech stocks that aren’t directly focused on the US consumer. Investors looking for such companies should consider taking a closer look at tech growth stocks such as StoneCo (STNE -4.27%) and Assets received (UPST -5.78%).

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As a company that operates only in Brazil, StoneCo is not a well-known company among American investors. These investors probably also don’t know that Brazil’s central bank has adopted policies that make its country the center of Latin American fintech, a sector that must serve a large population that often lacks bank accounts and credit cards. credit. Therefore, fintechs like StoneCo attracted the interest of Warren Buffett before the IPO. Berkshire Hathaway.

Buffett’s team may have favored this stock because it built a similar ecosystem to BlockThe ‘s Square ecosystem in the developed world. It provides businesses with the IT infrastructure needed to manage their financial technology and financial management needs. Because Brazilian fintechs can lend money without a bank, they can provide capital more efficiently.

StoneCo also stands out for its customer service. It takes a “no bureaucracy” approach to customer service and can quickly deploy staff where needed. This allows its representatives to solve problems in a quick and personalized way.

However, pandemic-related restrictions, rising inflation and increased reserve requirements have weighed on this once high-flying stock in 2019. Over the past 12 months, it has fallen by around 85%.

Nevertheless, the activity continues to increase. The total volume of payments increased by 31% in 2021 to reach more than 275 billion reais ($54.6 billion). This volume generated 4.8 billion reais ($950 million) in revenue, an increase of 45%. Unfortunately, since all expense categories grew faster than revenue, adjusted net profit fell 79% year-on-year to just R$203 million ($41 million).

Still, lockdown restrictions have eased and tech stock appears to have priced in inflation concerns. Additionally, the price-to-sales (P/S) ratio fell below four, near record lows for the stock. Therefore, StoneCo seems on track to pursue fintech in Brazil while offering a massively discounted purchase price to investors.

2. Reached

Upstart offers a loan assessment tool. It uses artificial intelligence (AI) to assess loan applications, in direct competition with Just Isaac Corporationthe FICO-score. It originally started with personal loans, but has since expanded to car loans. It also plans to assess potential mortgages and business loans as early as next year.

Upstart makes money by collecting fees for reviews. This leaves it without direct loan risk. However, poor loan decisions could have serious consequences. The majority of its lending volume comes from New Jersey-based Cross River Bank, and it could become vulnerable if its relationship with Cross River deteriorates. Additionally, the model did not face the test of a rising interest rate environment, and Fair Isaac could add AI functionality to improve its model.

Yet Upstart approves 70% of loans instantly. Additionally, the Consumer Financial Protection Bureau said its model approved 27% more loans than competing models, including nearly twice as many consumers with FICO scores between 620 and 660.

The model seems to attract more interesting interest. In 2021, Upstart posted revenue of $849 million, up 264% from a year ago. This helped the company earn $224 million in adjusted net income, up from $17.5 million in 2020. Such profitability is highly unusual for growth tech stocks. And in 2022, if the company’s projections hold, Upstart will generate about $1.4 billion in revenue, about 65% above 2021 levels.

Despite growing rapidly, Upstart has fallen nearly 80% from its 52-week high. But its price-to-earnings ratio of 59 is near record lows, and if it can handle a rising rate environment, its expansion into new markets and rapid revenue growth could deliver outsized returns.