Analysts and traders agree: now’s the time to consider payment names. Here are 4 stocks in the sector they say are the best buys right now.
Payment stocks have been on the rise lately.
PayPal (NASDAQ: PYPL) is up more than 5% over the last month, Square (NYSE: SQ) has gained 9%, and Visa (NYSE: V) is up more than 3%.
Square shares have risen more than 7% over the last week alone after Mizuho analyst Dan Dolev reiterated his Buy rating on the stock with a $350 price target – 34% higher than the price as of this writing.
“We believe Cash App may be en route to becoming the ultimate neo-bank and the money center bank of the future,” Dolev said in a note. “This could make buying SQ analogous to buying J.P. Morgan (NYSE: JPM) in 1871.”
Dolev’s bullish call is based on his view that Square is evolving into the bank of the future via the Cash App, which is becoming a financial hub for consumers as it now offers payment services, stock trading, and the ability to buy Bitcoin.
“We view Cash App as the ultimate challenger bank,” Dolev added. “Our detailed build of potential products shows a clear path from Cash App’s current $40-50 average revenue per user (ARPU) to $150-200 over the coming years by adding products that range from tax services, to insurance, to home equity lending.”
But Square isn’t the only payment stock getting analyst love recently. Mastercard (NYSE: MA) and Visa got bullish calls from the analysts at Evercore ISI, who said that the return of global travel will be a positive for both companies.
Traders like the group, too.
“We like the fintech space, we continue to like it,” said Michael Binger, president of Gradient Investments. “We think it’s going to be a secular growth industry for a long time. The whole cash and check to digital, that’s a trend that will go for quite some time. Cash App for Square and Venmo for PayPal are just doing to continue to benefit this industry.”
While Binger believes comparing Square to JPMorgan in 1871 is “a bit of a stretch,” he agrees that the market is underestimating just how much growth the company could see, even as analysts estimate the company will report 82% earnings growth for 2021, with sales more than doubling.
Binger also likes the legacy players Mastercard and Visa.
“They just continue to benefit as the economy opens up, and I really think the next leg of growth there is really going to be that cross-border revenue when they open up internationally and people start traveling there,” Binger said. “This is a great industry to be invested in and we’re going to stay invested there.”
MKM Partners’ JC O’Hara is also bullish on the whole group, but said there’s one stock in particular that he has his eye on now.
“My favorite name within the group is Visa,” O’Hara said. “We are seeing Visa already consolidated and breaking out to new highs this week, so Visa to me is showing leadership within the space.”
Pointing to Visa’s chart, O’Hara noted that the setup now is similar to a breakout seen back in 2017.
“Visa consolidated during most of 2016, early 2017, [then] broke to new highs,” O’Hara said. “The structure is very similar to today, and we can see just how uninterrupted that bull run over 2017 was. So if we see any sort of run similar to 2017, we are in for some meaningful upside for Visa here.”
