Whether you’re looking to scoop up some beaten-down bargains or trying to play it safe, analysts see potential in the payments sector heading into the new year.
Visa and Mastercard didn’t just increase revenue during the worst of the financial crisis. The companies also expanded volumes and grew earnings, Ellis noted, buoyed by the “long-term, underlying secular trend of cash-to-card conversion that really drives the engine of those businesses” and continues to this day.While the companies face some pressure from a strong U.S.
Those three merchant acquirers are known as the deal stocks, with all three announcing big mergers in 2019. Fiserv’s acquisition of First Data has played out the best, according to Dolev, as it came with the Clover point-of-sale business that competes with the likes of Block Inc.’s SQ Square and Toast Inc. TOST .
One question heading into 2023 within the merchant-acquiring category is whether FIS can turn itself around. The company has a new CEO, a new board chairman and activist-investor involvement. Management earlier this month announced a review of its business under that leadership.“There’s definitely hope,” said Dolev, who rates the stock a buy, but “I do think it requires a big lift.”
Ellis and Dolev are both bullish on PayPal’s stock, though Ellis said that stance is based more on the stock’s valuation than the outlook for its business. “Block is a relatively lower-margin business,” she said, with adjusted margins near 20%. “So it doesn’t take a lot” of change on the operating-expense side “to see huge growth on the Ebitda side.”
All the cards will have natural death in next 10 years