Companies involved in the online payment processing ecosystem look poised for gains from the most-recent holiday retail sales, which saw an online surge. Low unemployment levels, increase in wages and solid consumer confidence have spurred holiday sales this time.
Per a report by Mastercard, one of the leading payment processor companies having a worldwide payment network, e-commerce in the United States hit a record high this year.
Often online payments are made via debit or credit cards, from bank accounts or through contactless methods. The proliferation of technology has led to an increase in e-commerce in recent years, which in turn have boost digital payments. This growing trend of online shopping places the companies in this space for strong growth and thus investing in them seems a good option.
Year to date, the payments industry, has gained 45% year to date compared with the Zacks S&P composite’s rise of 27.2%.
Surge in E-commerce
According to Mastercard’s data tracking retail sales from Nov 1, 2019 through Christmas Eve, e-commerce sales consisted 14.6% of total retail and rose 18.8% year over year. Last year, e-commerce sales had grown 18.4%. Overall holiday retail sales, excluding autos, rose 3.4%.
With retailers like Amazon, Wallmart, Target making every effort to boost their online sales, the e-commerce boom is here to stay.
Solid E-commerce Sales to Drive Alternative Payments
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 third quarter of 2019 was $154.5 billion, reflecting 5% improvement sequentially and 16.9% growth year over year.E-commerce sales in the third quarter of 2019 accounted for 11.2% of total sales.
Some of the most common methods for online purchases are PayPal, Amazon Pay, Google Pay, American Express cards, Apple Pay, Stripe, Square, Visa Checkout and Masterpass.
While these are a few front-facing payment processors that stand to benefit from increased online payments, other companies that provide allied services at different nodes of the entire payment spectrum assisting payment processors, are expected to gain.
Per Statista, e-commerce share as a percentage of total retail sales in the United States has gone up from 5.8% in 2013 to 9% in 2017 and is further expected to go up to 13.7% by the year 2021.
Stocks to Gain
Global Payments Inc. GPN with its recently completed acquisition of Total System Services emerged as a preeminent pure play payments technology company, focusing on Small and Medium Businesses and leading Financial Institutions. The buyout will provide Global Payments with a market-leading position in integrated payments besides owned software and e-commerce plus omnichannel solutions. This deal will be the biggest in the history of Global Payments, strengthening its market presence in the payments industry, which is expanding rapidly and transforming from physical to cashless and electronic transactions.
The stock carries a Zacks Rank #2 (Buy) and has gained 78% in a year’s time. For 2020, the company’s earnings are expected to grow 21.9% compared with the industry’s expected earnings growth of 15.7%. The company witnessed its 2020 Zacks Consensus Estimate for earnings moving upward by 4.6% over the last 60 days.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Mastercard Incorporated MA is riding on higher switched transactions, increase in cross-border volume and gross dollar volume. Numerous acquisitions made over the past many years have fueled its growth. The company's solid market foothold, ongoing expansion, investment in technology and opportunities from the shift to electronic payments paved the path for long-term growth. Its solid capital position boosts investment in business.
The stock carries a Zacks Rank #2 and has jumped 58.6% year to date compared with its industry’s growth of 44.9%. The company has witnessed its 2020 Zacks Consensus Estimate for earnings moving upward by 1.1% over the last 60 days. For 2020, the company’s earnings are expected to grow 17.7% compared with the industry’s expected earnings growth of 15.7%.
PaySign Inc. PAYS is a provider of prepaid card programs and processing services for corporate, consumer and government applications through its Paysign brand.
The stock has a Zacks Rank #2 and has skyrocketed 191.7% year to date. The company witnessed its 2020 Zacks Consensus Estimate for earnings increasing 12.5% over the last 60 days. For the upcoming year, earnings are expected to shoot up 85.2% compared with the industry’s expected earnings growth of 15.7%.
Visa Inc. V carries a Zacks Rank #3 (Hold). Numerous acquisitions and alliances, plus technology upgrades and effective marketing have paved the way for long-term growth and consistent increase in revenues. The acquisition of Visa Europe is a long-term growth strategy. Its strong capital position is another positive.
The stock has gained 43.4% year to date. For 2020, the company’s expected earnings growth is 14.2% compared with 9.2% earnings growth forecast for its industry.
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Visa Inc. (V): Free Stock Analysis Report
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