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3 Payment Stocks Poised for Continued Momentum in 2022

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·6 min read
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Backed by a diversified product and solutions suite, the payment industry remains well-poised to capitalize on the prevalent inclination toward digital means. This transition globally, which was triggered by the COVID-19 pandemic, is here to stay and will continue even in the post-pandemic era. Per Mastercard’s MA 2021 Recovery Insights report, 20-30% of the pandemic-induced shift to digital commerce worldwide is expected to be permanent.

The payment space has witnessed mergers and acquisitions (M&A) often as the companies made every effort to bolster their capabilities. The industry has also been undertaking significant technological investments aimed at modernizing the digital payments space.

With a couple of days left for 2022 to begin, the digitization trend is expected to continue benefiting payment stocks like Mastercard, Visa V and American Express Company AXP. A recovering economy resulting in improved consumer spending is also likely to act as a tailwind for the stocks.

Although risks related to new variants of the COVID-19 virus continue to linger, the following factors are expected to provide a boost to the payment stocks in 2022.

Transition to Contactless Payment Methods

Digital payments’ popularity has grown in leaps and bounds, courtesy of its numerous benefits such as convenience, no physical contact, flexibility and security. Increasing Internet penetration and higher smartphone usage will continue to drive the global digital payment market growth in the days ahead. Per MarketsandMarkets, the worldwide digital payment market is anticipated to witness a CAGR of 15.2% over the 2021-2026 period.

Thus, payment stocks have been making every effort to rethink payment methods in sync with the evolving needs of consumers. With cash and checks taking a backseat, the stocks started investing in several flexible payment options encompassing cryptocurrency, biometrics, and QR code.

Rebounding Global Economy

Following multiple setbacks since the onset of the COVID-19 pandemic, 2021 marked the gradual turnaround of the global economy. The resumption of business activities remains underway. Severe supply-chain disruptions led to pent-up demand and increased savings that paved the way for higher consumer spending, which is good news for payment stocks. Massive pandemic-relief packages by governments and widespread vaccination programs globally have been aiding the recovery process. Increased rates of vaccination make consumers more confident about stepping out of their homes, thereby bolstering the in-store sales, which earlier took a hit due to the pandemic-induced restrictions.

The trend is likely to continue in 2022 as well. Management of J.P. Morgan Global Research forecast above-potential global growth in 2022 driven by increased consumer and corporate spending, strong equity market performance, and rise in vaccination rates and easing of supply-chain challenges across certain nations.

Mergers and Acquisitions

Solid capital position and reopening of economic activities are likely to bolster a company’s spending capability and aid it in pursuing increased M&A deals. Companies in the payment industry are focused on M&A strategy, which is aimed at diversifying product offerings, boosting business scale and expanding geographical presence. Exploring one’s capabilities beyond niche areas can actually help a company in creating multiple revenue streams and a varied customer base. Also, diversification is crucial these days to strengthen one’s market position. Per a BTI Consulting Group report, M&A activity is expected to increase and remain at peak levels in 2022.

Consistent Technological Advancements

The payment stocks are not only striving to offer seamless contactless payment processes for accelerated checkout experiences but also investing extensively in technology to enhance services. The companies have been making continuous technology investments and devising a comprehensive portfolio of fraud detection solutions, as a surge in contactless payments prompted severe payment frauds. These advancements are anticipated to result in cost savings and automation in processes, which are expected to drive the stock’s margins in the days ahead.

3 Top Stocks to Watch

Here we pick three payment stocks that carry a Zacks Rank #3 (Hold) and exhibit great potential to retain a purple patch going forward. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Headquartered in Purchase, NY, Mastercard is a technology company in the global payments industry. Partnerships with several well-established organizations, the launching of cost-effective solutions to capitalize on the current prospects in the global digital payments space and substantial technology investments are expected to continue benefiting Mastercard in the year ahead.

MA’s bottom line beat estimates in each of the trailing four quarters, the average surprise being 10.74%. The Zacks Consensus Estimate for Mastercard’s 2022 earnings suggests growth of 26.3% from the year-ago reported figure, while the same for revenues indicates an improvement of 19.5%.

In a year, shares of Mastercard gained 4% against the industry’s decline of 18.9%.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Based in San Francisco, CA, Visa continues to utilize advanced technologies for rolling out newer payment solutions. V has been striving to integrate blockchain technology with its payments platform. The presence of a trusted payment facilitator like Visa, which has more than 25 digital currency wallets linked to its systems, further encourages increased usage of crypto and digital currencies. These factors keep the company well-poised for growth in 2022.

Visa’s earnings surpassed estimates in each of the last four quarters, the average surprise being 9.81%. The Zacks Consensus Estimate for V’s 2022 earnings suggests 19% growth from the year-ago reported figure, while the same for revenues indicates an improvement of 16.9%.

In a year, shares of Visa inched up 1.5% against the industry’s decline of 18.9%.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

American Express, a globally integrated payments player with headquarters in New York, will continue to benefit on the back of a number of tailwinds. AXP continues to launch innovative card offerings and upgrade the existing ones to cater to the evolving needs of its card members. Additionally, American Express pursues a series of initiatives focused on technology advancements, the introduction of secure digital solutions and assistance in businesses to regulate payments.

The bottom line of AXP beat estimates in each of the trailing four quarters, the average surprise being 35.38%. The Zacks Consensus Estimate for American Express’ 2022 earnings suggests growth of 1.1% from the year-ago reported figure, while the consensus mark for the same has moved north by 0.3% in the past 60 days. The expected long-term earnings growth rate of AXP is pegged at 20%, better than the industry’s average of 17.2%.

Shares of American Express have climbed 39.2% in a year compared with the industry’s growth of 17.6%.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research


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Mastercard Incorporated (MA) : Free Stock Analysis Report

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American Express Company (AXP) : Free Stock Analysis Report

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