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Guggenheim's Positive Outlook For Payments Stocks: 'We Expect Strong Results'

Wayne Duggan

After a mixed 2018 for payment stocks, one analyst is predicting strong performance ahead.

The Analyst

Guggenheim analyst Jeff Cantwell made the following adjustments to his payment stock coverage:

  • Reiterated Buy rating for Fidelity National Information Servcs Inc (NYSE: FIS) with a price target lowered from $115 to $111;
  • Reiterated Buy rating for Total System Services, Inc. (NYSE: TSS) with a price target lowered from $111 to $100;
  • Reiterated Buy rating for Visa Inc (NYSE: V) with a price target lifted from $157 to $158.

The Thesis

The fundamentals in the payments space are far better than market valuations suggest, Cantwell said in a Wednesday note.

“Based on our review of all the data thus far, we expect strong results for payments companies in Q4 which will be driven by a surge in online spending that more than outweighs a minor headwind from department stores,” the analyst said.

A strong Q4 showing from payments stocks would go a long way in improving investor sentiment and confident in the space, Cantwell said. The analyst said he's expecting double-digit revenue growth across the board in 2019, with some companies clearing that bar by a wide margin.

Buy-rated First Data Corp (NYSE: FDC), Paypal Holdings Inc (NASDAQ: PYPL), Square Inc (NYSE: SQ) and Worldpay Inc (NYSE: WP) will be among the fastest-growing payments companies this year, according to Guggenheim.

Once investor confidence rebounds, Cantwell said forward earnings multiples in the space will start to improve accordingly.

Price Action

Here's how the payments companies mentioned by Guggenheim were trading at the time of publication Wednesday:

  • Worldpay was down 1 percent.
  • Square was up 2.2 percent.
  • PayPal was up 2 percent.
  • First Data was up 0.74 percent.
  • Visa was up 0.89 percent.
  • Total System was down 0.78 percent.
  • Fidelity National was down 0.41 percent.

Related Links:

Square's Guidance Miss: Analysts Speak Up

Barclays Initiates Coverage Of Payments Sector, Names PayPal As Top Pick

Photo courtesy of Square.

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