The stocks of payment companies like Visa, Mastercard and PayPal had good years in 2018. And analysts at Evercore ISI expect those good times to continue.
The investment bank's technology research team, led by David Togut, combed through the fintech and IT services sectors for companies whose stocks are their best ideas for next year. They focused on a range of themes, including digital payments, b-to-b as a growth driver, even the impact of a recession, and came away with eight stocks in payments, processors and IT Services that it recommends buying for 2019:
- Mastercard (MA): "The multidecade shift from cash and checks to electronic payments should continue to drive strong growth," Togut writes. "We prefer MA over [Visa] given higher constant currency revenue growth estimated over the next 2 years of 15% vs. 12%." He puts a $267 price target on the stock, or 33% upside from Wednesday's closing price.
- PayPal (PYPL): Barron's Tae Kim recently highlighted PayPal as the key player in retailers' backlash against Amazon.com (AMZN). "While Amazon doesn't need PayPal, everyone else does," he wrote in last week's magazine. Evercore sees the payments company as a "global payments leader, PYPL occupies a superior market position as a digital and mobile merchant acquirer with strong mobile wallet, gateway, P2P payments, and ACH money transfer capability," and thinks the stock has 29% upside from yesterday's close.
- Fidelity National Information Services (FIS): "FIS has the strongest platform in online and mobile banking among the core bank processors, a top spending priority of bank and credit union CEOs," Togut writes. It is, in other words, a bet that bank executives will continue to plow money into technology. They have a $132 price target, or 24% upside.
- Global Payments (GPN): Over the last quarter, the payments processor has been beaten down, falling from $128 a share in mid-September to currently right around $103. Nevertheless, "high-single to low-double-digit organic revenue growth from GPN's U.S. direct business, combined with expansion from high-growth channels, should support high-teens EPS gains," Togut writes. He puts a $158 price target, which is a whopping 51% rise.
- Visa (V): Despite preferring Mastercard to Visa, the team still sees 27% upside in the latter's stock, with a $175 price target compared with yesterday's $137.80 close. "We continue to believe Visa will generate long-term, mid-high teens EPS growth."
- Worldpay (WP): Evercore projects a 36% increase in the stock of this payments processor. "WP, with its strong e-commerce and global assets, combined with leading U.S. integrated payments capabilities, should be one of the biggest beneficiaries," they write. "Worldpay generates 40% of total net revenue from high-growth payment channels."
- Broadridge Financial Solutions (BR): The team calls the stock of this company, which provide communications and data solutions to financial institutions, the most defensive in their coverage universe and sees 36% upside from its current price of just under $100. "Over the next several years, BR should benefit from 1) increased outsourcing by banks, broker dealers and issuers of brokerage expense management, post-trade processing and tax managed services; 2) expanding digitization of proxy and regulatory communications; and 3) rapid growth of data and analytics services tied to proxy, regulatory communications and shareholder services."
- FleetCor Technologies (FLT): "FLT's valuation remains compelling for a high quality payments stock, trading at only 15 times our 2019E EPS," they write. With a 61% upside from its current levels, FleetCor has the biggest upside from current prices to price target among Evercore's picks.
|For more news you can use to help guide your financial life, visit our Insights page.|