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Upstart’s lending activities are likely to see an uptick.
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Customers of Robinhood are increasingly trading stocks, options, and cryptocurrencies.
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S&P Global’s credit rating sector is expected to expand as companies take on more debt again.
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Here are 10 stocks I prefer over emerging ones.
On September 17th, the Federal Reserve lowered its benchmark interest rate by 25 basis points. This move, along with another expected reduction in 2025, has analysts projecting additional rate cuts by year-end, coinciding with three cuts observed in 2024. Typically, whenever rates grind lower, investors pivot towards either higher-risk growth stocks or those that yield significant dividends.
Lower fees, however, present a mixed bag for various financial stocks. For conventional banks, while reduced fees might stimulate lending activities, the net interest income from those loans diminishes. If the rates are low, setting up a savings account or even a certificate of deposit doesn’t look too appealing.
Yet, many financial stocks can still perform well despite the declining interest rates, beyond just traditional banks. Let’s explore three promising options: Upstart, Robinhood, and S&P Global.
Upstart specializes in the lending market, facilitating loan approvals for banks, credit unions, and car dealerships. Rather than relying solely on traditional metrics like credit scores and annual income, its AI-driven platform assesses unconventional data—things like standardized test results, GPAs, and previous job history—to authorize a variety of loans.
Being an intermediary, Upstart doesn’t manage these loans directly, meaning that it doesn’t require exorbitant interest rates for profitability. The majority of its earnings stem from referral fees charged to lending partners. With lower interest rates, there’s a likelihood of more loan applications, potentially boosting fee-related revenues without drastically affecting profit margins.
The startup scene faced significant challenges in 2022 and 2023 as rising interest rates dampened demand for new loans. However, as rates began to drop in 2024, the growth trajectory for companies like Upstart appears to be improving. Thus, the Fed’s rate cuts could provide substantial benefits to its business in the future.
Looking ahead from 2024 to 2027, analysts predict that revenue and adjusted EBITDA are set to grow significantly— at approximate yearly rates of 36% and 245%, respectively—as interest rates decrease, automation of loans becomes more prominent, and they draw in high-quality borrowers. These projections indicate a remarkable growth for stocks trading at around 22 times next year’s adjusted EBITDA and could surge even further as economic conditions improve.
Robinhood, known for its commission-free trading, earns most of its revenue from two key sources: the Payment For Order Flow (PFOF) model, which sells trades to high-frequency trading firms, and net interest income from margin loans and sweep accounts.
The Fed’s cut in interest rates is expected to lower net interest income, yet it may simultaneously drive up trading volumes as investors shift back towards riskier assets and cryptocurrencies. Consequently, more users will likely subscribe to Robinhood’s Gold Tier, which provides benefits such as interest-free margin, reduced margin rates, and enhanced access to trading data. This service has seen an increase in subscribers, reaching 3.5 million from just 2.6 million at the end of 2024.
From 2024 to 2027, analysts predict that Robinhood’s revenues will grow at around 22% while adjusted EBITDA may rise at 30%. Although the stock isn’t exactly cheap at 38 times its adjusted EBITDA for next year, it’s positioned to grow as reduced rates coax more investors back into the market.
S&P Global provides essential financial data, credit ratings, and analytics services to numerous Fortune 100 and Fortune 500 firms. Major banks, insurance companies, and institutional investors utilize their tools to guide financial strategies. New AI features, like the Spark Assist Generative AI Co-Pilot, are being rolled out to streamline and automate various processes.
S&P, along with smaller rivals like Moody’s, retains a strong foothold in this lucrative sector. Its clientele typically ensures consistent demand during both market booms and downturns. Nonetheless, growth in their credit rating business faced a temporary setback in 2023 due to reduced debt issuance.
However, as interest rates fell in 2024, growth prospects resumed. Between 2024 and 2027, analysts forecast revenue and adjusted EBITDA will grow by CAGRs of 7% and 8%, respectively. Valued at about 21 times next year’s adjusted EBITDA, it’s one of the most straightforward ways to capitalize on future rate cuts.
Potential investors should keep these points in mind before diving into startup stocks.
Motley Fool Stock Advisor recognizes ten stocks they believe are sound investments right now—and Upstart isn’t one of them. Those selected could offer significant returns in the coming years.
Looking back, stocks like Netflix, which trace back to recommendations made in December 2004, show remarkable growth. A $1,000 investment at that time would be worth around $661,694 today. Similarly, an investment in Nvidia from April 2005 has grown to about $1,082,963.
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*Stock Advisor’s returns are as of September 15th, 2025.
Leo Sun has no positions in any mentioned stocks. Motley Fool has recommended Moody’s, S&P Global, and Upstart. Please check the Motley Fool’s Disclosure Policy.
Three financial stocks that could rise following the Fed’s interest rate reduction.
