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Payments Stocks to Get a Lift From Holiday Season Sales Boom

Sapna Bagaria

Payments companies should see an upsurge in card processing via their payments' network in the imminent holiday season, which is expected to report higher sales figures.

The spurt in spending will act as a catalyst for payments companies’ brisk business as transactions are increasingly being made online, through mobiles and cards (debit as well as credit). Moreover, a continued rise in purchases via e-commerce, which generally involves the use of new-age payment methods, bodes well for the industry.

All these imply frequent usage of payment networks and cards, generating revenues and fee income for the players involved.

Strong Sales Expected in Holiday Season

On Oct 3, the National Retail Federation (NRF) reported that it expects holiday retail sales during November and December to beat the 2018 mark and rise between 3.8% and 4.2%. This may account for total sales of around $730 billion albeit the forecast does not exclude automobile dealers, gasoline stations and restaurants.

NRF President and CEO Matthew Shay stated that the Sino-US trade war and a slowdown in economy may restrain sales. However, the country’s economy is still on the upswing and courtesy of higher consumer spending, the niggling issues can be sidelined.

The projection considers economic factors like employment, wages, consumer confidence, disposable income, consumer credit and previous retail sales. The low unemployment rate of 3.7% and high wages keep consumer sentiment bullish, thereby giving them the ability to splurge more in the holiday spell.

Also, NRF predicts online and other non-store sales to perk up between 11% and 14% from $146.5 billion in 2018 to the $162.6-$166.9 billion range.

In a year’s time, the industry has rallied 16.6% compared with the Zacks S&P 500 composite’s decline  of 0.3%.

Solid E-commerce Sales to Drive Alternative Payments

Proliferation of technology in everyday lives has led to increased use of online sales aka e-commerce. The Census Bureau of the Department of Commerce in its latest report announced  that the estimate of U.S. retail e-commerce sales for the second quarter of 2019 was $146.2 billion, reflecting an improvement of 4.2%  sequentially and 13.3% year over year.

E-commerce mostly entails the use of online payment methods. Some of the most common modes for online shopping are PayPal, Amazon Pay, Google Pay, American Express cards, Apple Pay, Stripe, Square, Visa Checkout, Masterpass et al.

While these are some of the front-facing payment processors that stand to gain from a positive momentum in online payments, other companies that provide allied services at different nodes of the entire payment spectrum assisting payment processors also benefit from this uptrend.

Stocks to Gain

Mastercard Inc. MA is perfectly poised to grow from higher switched transactions, increase in cross-border volume and gross dollar volume as well as gains from acquisitions.

The stock carries a Zacks Rank #3 (Hold) and has gained 27% in a year’s time. For the current year, the company’s earnings are expected to bump up at 17.26% compared with the industry’s increase of 9.4%.

Global Payments Inc. GPN with its recently completed acquisition of Total System Services has become a preeminent pure play payments technology company, focused on Small and Medium Businesses and leading Financial Institutions. The buyout will offer Global Payments a market-leading position in integrated payments, owned software and ecommerce plus omnichannel solutions. The deal will be the biggest in the history of Global Payments’ affairs and will provide it with a bolstered market presence in the payments industry, which is expanding rapidly and transforming from physical to cashless and electronic.

The stock carries a Zacks Rank of 3 and has surged 34% in a year’s time. For the current year, the company’s earnings are expected to grow at 17.5% compared with the industry’s growth of 9.4%.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fiserv, Inc. FISV provides information management systems and services to the financial and insurance industries. Leading services include transaction processing, outsourcing, business process outsourcing, software and systems solutions.

The stock is a Zacks #3 Ranked player and has gained 28% in a year's time. For the current year, the company’s earnings are expected to grow 24% compared with the industry’s rise of 9.4%.

EVO Payments, Inc. EVOP is a payments service provider of merchant acquiring and processing solutions for merchants, independent software vendors, financial institutions, independent sales organizations, government organizations and multinational corporations. 

The stock is #3 Ranked and has gained 13% in the past year. For the current year, the company’s earnings are expected to grow 13.5% compared with the industry’s growth of 9.4%.

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