The Ratings Game: Visa, Mastercard are ‘great defensive names’ for 2023, but PayPal and Coinbase stocks could be set for a rebound, analysts say

by | Dec 21, 2022 | Stock Market

Whether you’re looking to scoop up some beaten-down bargains or trying to play it safe, analysts see potential in the payments sector heading into the new year. With a potential recession on many investors’ minds, it’s worth noting that during the last big downturn, in 2009, fewer than a third of S&P 500
components managed to boost their revenue, according to Dow Jones Market Data, but two of them were Visa Inc.
and Mastercard Inc.
Those stocks remain “great defensive names,” SVB MoffettNathanson analyst Lisa Ellis said during a Barron’s Live event on Wednesday.

Visa and Mastercard didn’t just increase revenue during the worst of the financial crisis. The companies also expanded volumes and grew earnings, Ellis noted, buoyed by the “long-term, underlying secular trend of cash-to-card conversion that really drives the engine of those businesses” and continues to this day. Don’t miss: Best bets for payments stocks in 2023 on Barron’s Live While the companies face some pressure from a strong U.S. dollar, they remain “great plays during a macro slowdown” as they’re “actually beneficiaries of inflation, because their pricing is tied to the dollar value of payments,” she said. Picking between the two is like “choosing between your children,” Ellis said, though she has a slight preference for Visa, which she sees trading at a “wider discount to Mastercard than normal” as the market underappreciates the company’s European business. Mizuho’s Dan Dolev, who spoke at Wednesday’s event as well, named Fiserv Inc.
one of his favorite defensive plays for 2023. The merchant-acquirer company’s stock has held up better than peers Fidelity National Information Services Inc.
and Global Payments Inc.
this year, falling less than 3% so far in 2022 versus declines upward of 25% for the other two. Those three merchant acquirers are known as the deal stocks, with all three announcing big mergers in 2019. Fiserv’s acquisition of First Data has played out the best, according to Dolev, as it came with the Clover point-of-sale business that competes with the likes of Block Inc.’s
Square and Toast Inc.
“They’ve got massive breadth because they have millions of merchants and they also have a great, shiny, white POS [point of sale], which everyone likes to have,” he said. Dolev added that he’s “not as worried” about the fact tha …

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