7 Payments Stocks To Buy When The Online Shopping Happens
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E-commerce and online trading were booming even before the novel coronavirus, but since the pandemic had to temporarily shut down many retailers, e-commerce is seeing years of growth in just a few months. Payments to buy stocks go with you on the journey.
Earlier this year, e-commerce accounted for 11.8% of all US retail sales, suggesting there is plenty of room for growth and a cheap runway for payment stocks. In May alone, domestic online retail sales rocked the 2019 Christmas shopping season numbers.
By that point in 2020, domestic ecommerce sales are up 13% year over year, but that topic will fade when Covid-19 is a thing of the past. Data suggests that when the economy reopened somewhat in May, card payment transactions increased slightly, but online debit and credit use remained stable. This is good news for online merchants and good news for payment stocks.
Here are some potential winners among the payment stocks as more purchases move to online stores.
- PayPal stocks (NASDAQ:PYPL)
- MasterCard (NYSE:MA)
- Global payments (NYSE:GPN)
- Wage badge (NASDAQ:PAYS)
- city square (NYSE:SQ)
- Apple (NASDAQ:AAPL)
- Visa (NYSE:V)
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Because of his longstanding relationship with Ebay (NASDAQ:EBAY) – it was spun off the auction site a few years ago – PayPal is one of the original payment stocks with close ties to the e-commerce universe. While PayPal faces competitive challenges in both business and consumer markets, the company maintains its enviable position throughout the online payments ecosystem.
“PayPal remains a preferred online partner,” said Morningstar. “In addition, the iZettle acquisition provides the company with a viable platform for point-of-sale transactions, and its mobile payment experience could strengthen its position on this site as consumers seek more convenient options at the checkout.”
The company’s business and consumer-centric platforms, while not immune to competition, cement its presence in the booming online retail space. PayPal equips small and medium-sized businesses with the infrastructure and cash register systems to accept online payments. The company holds a significant stake in consumer-to-merchant payments on platforms like eBay and others.
PayPal is a growth stock and, as such, is valued at 53.48 times future earnings. Given the expectations that annual sales will grow at an average annual growth rate (CAGR) of 17% over the next five years, this is not necessarily a challenge.
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Mastercard is a credit and debit card giant, but there’s more to the story, including the company’s ex-US exposure that includes footprints in regions where online payments are just beginning to pick up pace.
Mastercard “is likely to outperform the competition given its exposure to Europe and emerging markets where MA is gaining market share,” said Goldman Sachs.
Mastercard is one of the most important payment stocks as it benefits from consumers moving away from cash, which the pandemic is accelerating.
“Our platform uniquely positions us to support the accelerated digital payments transition to consumer and business payments due to the COVID-19 pandemic, including a growing consumer preference for contactless payments,” CEO Ajay Banga said earlier in the Profit – and the company’s statement of income this month.
In addition, Mastercard is a dividend growing name that has the resources to sustain its payout growth. That’s a positive trait at a time when so many S&P 500 components cut dividends in the first half of the year.
Global Payments (GPN)
Global Payments is the dominant name in near field communication (NFC) – the technology that supports a range of contactless payment solutions. This enables the company to capitalize on the ongoing shift away from cash.
The company is more than five decades old, but impressively demonstrates its ability to keep up with the times. Today, Global Payments is a technology company focused on the burgeoning software side of the payments ecosystem. Since 2012, Atlanta-based Global Payments has made at least five acquisitions that bolster its technology presence. This should account for around 60% of sales in 2020.
Earlier this month the company announced a partnership with. famous Amazons (NASDAQ:AMZN) Amazon Web Services (AWS) for the provision of cloud-based platforms for financial institutions.
“Global Payments’ cloud-based issuer processing platform, powered by AWS, will enable financial institutions of all sizes to more seamlessly operate the entire card issuance and management lifecycle,” it said in a statement.
The stock lags behind the broader fintech universe this year, but when added up, that’s likely a name higher than $ 200, compared to the $ 170 range it’s currently in.
Number sign (PAY)
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Paysign is a provider of prepaid card programs and processing services, suggesting it should be boosted by government incentives and increased collection of unemployment benefits. That small-cap name is now a risky payment stock, however. And not just because of its market capitalization of $ 508 million.
On August 14, the company announced its second quarter results, finding that revenue plummeted 25% year over year. Plasma donation is a short-term headwind for Paysign. People who donate plasma are often compensated for it through Paysign. However, due to Covid-19, plasma donations are falling, resulting in lower volumes for Paysign.
Following the news, the stock fell more than 20% in one day, entering a bear market in the process. Conclusion: Paysign is being used to defeat Covid-19 and admits to it.
“Given the uncertainty about the extent and timing of the potential future spread or containment of COVID-19 and the imposition or relaxation of protective measures, management cannot reasonably estimate the impact on the company’s future operating results, cash flows or financial condition.” so the company.
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Squares Bread and Butter has long been a mobile and point-of-sale payment system for small and medium-sized businesses, but the company is growing rapidly in other areas. With its CashApp, Square is the most credible competitor of PayPal’s Venmo app in the digital wallet space.
In addition, Square is expanding its presence in the midmarket business loan processing market, as demonstrated this year with the government’s Paycheck Protection Program (PPP). Square eagerly and successfully processed thousands of loans overlooked by traditional banks, reaffirming that this company is a nuisance to legacy financial firms.
In the e-commerce space, Square has potentially far-reaching opportunities as it works with both sellers and platform providers to provide payment solutions.
There are two basic factors that bode well for long-term Square growth. First of all, the users really like the platform. Conversely, most customers don’t like standard banks. Second, Square consistently shows adaptability. Square realized that some companies could outgrow the company’s initial product offerings and evolved into virtual sales programs, online stores, virtual terminals, and loyalty programs.
Combine that adaptability with a fully addressable market that is not yet heavily penetrated, and the long-term growth trajectory for Square is tempting.
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With Apple Pay, Apple is a separate payment transaction stock. Apple Pay acts as a digital wallet that enables customers to make contactless payments in a variety of stationary environments as well as in iOS apps.
Obviously, the investment community looks at Apple through the lens of smartphones, tablets and PCs, among other things, but Apple Pay is an increasingly relevant part of the company’s product mix.
By some estimates, Apple Pay currently accounts for 5% of global card transactions, a number that could climb to 10% by 2025. If that 10% figure proves to be true, Apple Pay is likely generating over $ 1.1 billion in revenue for the company.
Investors may not have to wait that long. According to Statista, Apple Pay generated $ 988 million in revenue worldwide last year and could grow to $ 4 billion by 2023.
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Visa and Mastercard are direct competitors and committed to the same market trends. In the coronavirus environment, both benefit from the switch to cashless payments and online shopping, but are limited by a lack of cross-border transactions or reduced travel. Payment providers charge higher fees for international transactions, that is, for American travel in Europe.
The company confirmed growth in contactless and e-commerce in the June quarter due to the pandemic.
“We have seen growth in debit and e-commerce volumes in Visa Direct transactions, tap-to-pay and click-to-pay enablement, and revenue from value-added services,” said CEO Al Kelly.
For long-term investors considering Visa, the good news is that digital payments outperformed cash globally just a few years ago, which means there is still a long way to go for growth. In addition, Visa and Mastercard charge fees regardless of where a customer conducts a transaction, so e-commerce, which is stealing shares from physical stores, is not a problem for these payment balances.
Todd Shriber has been an InvestorPlace Contributor since 2014. He owns shares in Square.
The post 7 Payments Stocks to Buy as Shopping Moves Online first appeared on InvestorPlace.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.