Goldman: 'Our top picks include XYZ, KLAR, AFRM, and CHYM'.

The analyst comments "Fintech shares have been volatile quarter to date, but have re-rated over the past several weeks. Overall, we believe the broader macro backdrop is favorable for the consumer fintech space with 1) benign credit trends, 2) healthy consumer data (both spending and wage growth), and 3) supportive funding markets that remain an attractive source of funding for non-bank lenders. While we expect the sector to remain somewhat volatile on the back of swings in gas prices, we continue to favor the consumer fintech sector over payments as a function of its stronger growth characteristics and clearer market share gaining stories. Our top picks include XYZ, KLAR, AFRM, and CHYM, where we see a clear leverage to the themes of greater consumer adoption of BNPL and continued penetration of neobanking models into the low end and mass market consumers.

2Q Fintech Spotlights:

Decomposing spend vs lend models: We look to differentiate between spend-centric and lend-centric gross profit growth across the diverse range of fintech models in our coverage. Our analysis shows KLAR, CHYM and XYZ as having the most spend centric models with KLAR and XYZ seeing the most mix shift towards lending over the next year relative to the current mix of the business. We also show the relationship between valuations which implies a loose positive correlation between higher multiples and a more spend centric model - although we note that dispersion is high, and we see opportunities for greater discernment between fintech models over time. We see KLAR as most dislocated relative to the spend centricity of its business.

Square customer acquisition trends supportive of continued GMV acceleration: We also spotlight our bottom-up volume build for Square based on the recent disclosures around New Volume Added - a key metric for measuring customer acquisition for the company. We continue to expect accelerating volume growth, largely driven by momentum in the U.S., and believe U.S. volumes could accelerate to the 9-10% range for 2026. We see this, as well as an even greater acceleration in Square gross profit as supportive for the stock.

Spotlight on AFRM guidance: We remain constructive on the outlook for AFRM into FY2027 driven by continued market share gains, robust GMV growth, and the company’s management of credit outcomes and unit economics. While we expect the lapping of the Walmart portfolio to KLAR to be supportive of GMV trends in the coming year, we believe AFRM’s typical conservative starting point for guidance implies limited upside to GMV expectations for the coming year (at least initially). As such, given the recent run-up in the stock, we see a more mixed risk reward into earnings."