Fintech Stocks Fall Back to Earth

That dynamic, combined with a broader retreat from tech stocks ahead of interest rate increases, contributed to a selloff in what had been some of the market’s best performing names. Higher rates make it easier for investors to find places to park their money for a gain, which makes them less willing to put their money into riskier wagers like growth stocks.

Shares in Block, formerly known as Square Inc., are down 35% over the past three months and down 23% since the start of 2021.

PayPal’s

PYPL -0.99%

stock has fallen 30% over the past three months and 18% since the beginning of the year. Robinhood, after skyrocketing in the private market in 2020, now trades at less than half its July initial public offering price.

They join one-time highfliers like

Peloton Interactive Inc.

and

Zoom Video Communications Inc.,

stay-at-home stocks that have fallen out of favor. Meanwhile, shares in the banks that have been the targets of fintech disruptors are on a tear.

Still, the arrival of the Omicron variant could reignite interest in stay-at-home companies. And some fintech stocks are doing quite well.

Bill.com Holdings Inc.,

which makes software that small businesses use to pay vendors and get paid by customers, is up 86%.

Perhaps no fintech has experienced market whiplash as much as

Upstart Holdings Inc.

UPST -6.92%

Shares in the company, an online provider of unsecured personal loans, rose nearly 10-fold through mid-October. Americans resumed some borrowing, and government-aid programs helped keep defaults low. Upstart’s shares outpaced those of electric-car startup

Lucid Group Inc.

and Covid-19 vaccine-maker

BioNTech SE

to become the best-performing big company listed on the Nasdaq exchange.

Since closing at an all-time high of $390 in October, Upstart’s shares have fallen nearly 60% to $160. Executives told analysts on an earnings call in November that consumer behavior was beginning to resemble pre-pandemic patterns, which they expected would eventually result in higher default rates. That spooked shareholders, though the stock is still up almost fourfold this year.

This month, Jefferies analyst

John Hecht

cut his price target on Upstart to $175 from $300, partly because of the uncertainty around loan performance and partly because its fintech peers are trading at lower price-to-earnings multiples.

“Investors are moving away from risk,” Mr. Hecht wrote.

Write to Peter Rudegeair at Peter.Rudegeair@wsj.com