My Top 2 Financial Stocks to Buy in 2026

Sezzle reported strong Q3 metrics with revenue up 67% year-over-year, net income up 73% and a 22.8% net profit margin while serving nearly 3 million active customers; the company carries a $33.7 million allowance for credit losses that has more than doubled year-over-year but management continues to add customers and expand margins. Robinhood delivered accelerated top-line growth — overall revenue more than doubled year-over-year, crypto trading was up over 300% YoY in the quarter, transaction-based revenue rose 129% YoY, and net interest revenue jumped 66% YoY as funded customers reached 26.8 million and total accounts 27.9 million — supporting a notable re-rating in the stock. Both names illustrate outsized fintech growth and margin expansion, with Sezzle exposed to BNPL credit-risk dynamics and Robinhood benefitting from diversified trading and subscription monetization (Robinhood Gold).

Analysis

Market structure: BNPL winners include Sezzle (SEZL) and Klarna (KLAR) and platform aggregators such as Robinhood (HOOD) that expand crypto/options; large card networks and pure consumer finance lenders face margin compression if BNPL gains 5–15% share from cards over 3 years. SEZL’s 22.8% net margin and ~3M active customers vs. its doubled credit-loss allowance ($33.7M) imply the market is repricing tail credit risk, not revenue growth. Cross-asset: stronger fintech sentiment is risk-on — expect tighter IG spreads and wider consumer ABS spreads if delinquencies tick up; higher equity vol in small-cap fintech names and modest USD weakening on risk-on flows.

Risk assessment: Tail risks are regulatory (CFPB/EC proposals within 6–18 months imposing capital/reserve rules), a macro consumer shock (unemployment +200bps within 12 months) or a funding freeze for small BNPLs. Short-term (days–weeks) moves will be earnings/volume-driven; medium (3–12 months) will track delinquencies; long-term (12–36 months) depends on merchant adoption and regulatory capital. Hidden dependencies: merchant fees/interchange, warehouse funding lines, and crypto volatility exposure at HOOD are single points of failure.

Trade implications: Direct plays — size high-conviction, capped positions: tactical long SEZL (small starter 2–3% net) and long HOOD via defined-risk options to capture asymmetry from continued user growth (target 9–12 months). Pair trade: long SEZL / short AFRM to exploit margin differential and weaker sentiment for AFRM over 6–12 months. Hedge consumer credit exposure with modest long protection on consumer ABS or reduce high-yield consumer allocations by 10–25%.

Contrarian angles: Consensus underestimates regulatory tightening and credit-cycle sensitivity; SEZL’s margin profile may be overstated if loss rates rise 200–400bps. Conversely, HOOD’s scale (26.8M funded customers) and 300% crypto growth suggest upside is underappreciated if crypto stays strong; the market may be over-penalizing BNPL stocks (SEZL ~60% off ATH) — opportunity exists but requires disciplined sizing and catalyst-based exits (earnings, delinquency prints, regulatory guidance).

Key Decisions for Investors

• Establish a tactical long in SEZL sized 2–3% of equity portfolio (accumulate on rallies <+15% from current or on pullbacks of -10% from entry). Set a stop-loss at -40% and trim half at +50%; hold horizon 9–12 months, reassess after next two quarterly delinquency prints.
• Buy defined-risk exposure to HOOD: purchase 3–6 month OTM call spreads (size = 1% portfolio risk) to capture upside from continued user/crypto growth; target exit at 2x premium or if funded customers growth <+5% QoQ or transaction revenue growth falls <+40% YoY.
• Enter a pair trade: long SEZL / short AFRM equal notional (1–2% portfolio gross each) for 6–12 months to exploit margin/valuation dispersion; close if AFRM outperforms SEZL by >25% or if BNPL sector guidance materially improves for AFRM.
• Reduce direct exposure to consumer ABS/high-yield consumer credit by 10–25% over 30 days and reallocate proceeds to selective fintech longs or cash as insurance against a 200–400bps rise in delinquencies over next 12 months.
• Monitor regulatory catalysts: subscribe/watch for CFPB/EC BNPL rule announcements and major merchant contract wins within next 90 days; do not increase long exposure until company-level regulatory-capital guidance or loss-rate improvement is confirmed.