Market Overview

Credit Suisse Is Bullish On Payment Processors, Notes 'People Will Not Stop Buying Things'

Credit Suisse Is Bullish On Payment Processors, Notes 'People Will Not Stop Buying Things'

  • Paul Condra of Credit Suisse initiated coverage of the "Payments & Fin-Tech" space.
  • Condra noted that a fee-per-transaction model benefits from massive volumes on a fixed-cost processing.
  • The analyst added that simply enough, "People will not stop buying things."
  • Paul Condra of Credit Suisse initiated coverage of companies involved in payments and fintech, noting that the industry's fee-per-transaction model "benefits from massive volumes" and transactions on a fixed-cost processing base.

    According to Condra, there were a total of 357 billion global non-cash transactions in 2014. In 2013, the total global payment card volume corresponded to $16.3 trillion. The analyst noted that this makes the payments space attractive because simply enough, "people will not stop buying things" – especially as consumers continue turning more toward online shopping.

    In order to satisfy the growing demand for payments and fintech, providers are rushing to provide the consumer base with a compelling and unique proposition. Naturally, this implies that investors can find attractive opportunities in the growing space.

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    Top Ideas

    Here is a summary of Condra's top-Outperform rated U.S. picks.

    WEX Inc (NYSE: WEX) has an attractive exposure of 35 percent to a high growth business, corporate payments. The analyst suggested that the company could see margin expansion in 2016 from pricing initiatives, benefits from recent M&A activity and a profitable European business.

    Blackhawk Network Holdings Inc (NASDAQ: HAWK) is a prepaid payment network that offers gift, telecom and debit cards. According to Condra, the company is expected to sustain mid-teens earnings per share growth given its "strong" competitive moat. The stock also offers a "relative value for growth" of 16x 2017PE and should also expand its margins over the longer term.

    Global Payments Inc (NYSE: GPN) provides payment and digital commerce solutions. The company is benefiting from "strong fundamental trends," especially in tech-enabled processor channels. In addition, the company offers a diversified portfolio across online/integrated/international channels. The analyst added that investors could also own a basket of Global Payments' peers to diversify risk while gaining the exposure to the strong growth trends.

    Heartland Payment Systems, Inc. (NYSE: HPY) provides card payment processing services to merchants. The analyst noted that the company has a differentiated direct sales model with a niche focus on education/restaurants. Similar to Global Payments, investors should consider owning a basket of peers.

    Vantiv Inc (NYSE: VNTV) operates two segments, and offers payment processing services and card processing services. The analyst stated the company operates a "high quality" integrated/online payments assets that works with large merchants.

    Finally, Paypal Holdings Inc (NASDAQ: PYPL) offers investors the "highest exposure" to the fastest growing segment of payments in online and mobile. The analyst noted that the stock will become "more investable" after a couple "sold quarters" laps.

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