3 payment stocks on the verge of continuing their momentum in 2022

Supported by a diverse range of products and solutions, the payments industry remains well positioned to capitalize on the widespread inclination towards digital means. This global transition, which was sparked by the COVID-19 pandemic, is here to stay and will continue even in the post-pandemic era. Through MasterCardAccording to the MA 2021 Recovery Insights report, 20-30% of the pandemic-induced digital commerce shift globally is expected to be permanent.

The payments space has often seen mergers and acquisitions (M&A) as companies go out of their way to build capacity. The industry has also made significant technological investments aimed at modernizing the digital payments space.

With a few days to go before the start of 2022, the digitization trend is expected to continue to benefit payment stocks like Mastercard, Visa V and American Express Company AXP. An economic recovery leading to improved consumer spending is also likely to act as a tailwind for stocks.

While the risks from new variants of the COVID-19 virus persist, the following factors are expected to boost payment stocks in 2022.

Transition to contactless payment methods

The popularity of digital payments has grown in leaps and bounds, thanks to its many benefits such as convenience, lack of physical contact, flexibility, and security. Growing internet penetration and increased use of smartphones will continue to drive the growth of the global digital payments market in the days to come. According to MarketsandMarkets, the global digital payment market is expected to experience a CAGR of 15.2% over the period 2021-2026.

Thus, payment stocks have made every effort to rethink payment methods in line with the changing needs of consumers. With cash and checks taking a back seat, stocks began investing in several flexible payment options including cryptocurrency, biometrics, and QR code.

Rebounding of the global economy

After multiple setbacks since the start of the COVID-19 pandemic, 2021 marked the gradual recovery of the global economy. The resumption of commercial activities is still in progress. Severe supply chain disruptions have resulted in pent-up demand and rising economies that have paved the way for increased consumer spending, which is good news for payment stocks. Massive pandemic relief packages by governments and widespread immunization programs around the world have helped the recovery process. Rising vaccination rates are making consumers more confident to leave their homes, boosting in-store sales, which had previously been hit due to restrictions brought on by the pandemic.

The trend is also expected to continue in 2022. JP Morgan Global Research management expects global growth above potential in 2022, driven by increasing consumer and business spending, strong stock market performance, increasing vaccination rates and easing supply chain challenges in some countries.

Mergers and Acquisitions

A strong capital position and the reopening of economic activities are likely to strengthen a company’s spending capacity and help it pursue increased M&A transactions. Companies in the payments industry are focused on the merger and acquisition strategy, which aims to diversify product offerings, increase company size and expand geographic presence. Exploring its capabilities beyond niche areas can actually help a business create multiple revenue streams and a diverse customer base. Also, diversification is crucial nowadays to strengthen its position in the market. M&A activity is expected to increase and remain at record levels in 2022, according to a report by BTI Consulting Group.

Constant technological progress

Payment stocks not only strive to offer transparent contactless payment processes for accelerated payment experiences, but also invest heavily in technology to improve services. Companies have continuously invested in technology and built a comprehensive portfolio of fraud detection solutions as an increase in contactless payments has led to serious payment fraud. These advancements are expected to result in cost savings and process automation, which should increase inventory margins in the days to come.

3 best stocks to watch

Here we choose three payoff stocks that carry a Zacks Rank # 3 (Hold) and have great potential to hold a purple spot in the future. You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.

Based in Purchase, NY, Mastercard is a technology company in the global payments industry. Partnerships with several well-established organizations, the launch of cost-effective solutions to capitalize on the current prospects of the global digital payments space, and substantial technology investments are expected to continue to benefit Mastercard over the coming year.

MA’s net income has exceeded estimates in each of the past four quarters, with an average surprise of 10.74%. Zacks’ consensus estimate for Mastercard earnings in 2022 suggests growth of 26.3% from the figure released a year ago, while the same for revenue shows a 19.5% improvement.

In one year, Mastercard shares have gained 4% against an industry decline of 18.9%.

Image source: Zacks Investment Research

Headquartered in San Francisco, California, Visa continues to use advanced technologies to deploy new payment solutions. V has strived to integrate blockchain technology into its payment platform. The presence of a trusted payment facilitator like Visa, which has more than 25 digital currency wallets linked to its systems, further encourages increased use of cryptocurrencies and digital currencies. These factors keep the company well positioned for growth in 2022.

Visa profits have beaten estimates in each of the past four quarters, with an average surprise of 9.81%. Zacks’ consensus estimate for V’s earnings in 2022 suggests 19% growth over the figure released a year ago, while the same for revenue shows a 16.9% improvement.

In a year, Visa shares were up 1.5% versus an industry decline of 18.9%.

Zacks investment researchImage source: Zacks Investment Research

American Express, a global integrated payments player headquartered in New York, will continue to benefit from several favorable winds. AXP continues to launch innovative card offerings and upgrade existing ones to meet the evolving needs of its members. In addition, American Express is pursuing a series of initiatives focused on technological advancements, the introduction of secure digital solutions and assisting businesses to regulate payments.

AXP’s end result has beaten estimates in each of the past four quarters, with the average surprise being 35.38%. Zacks’ consensus estimate for American Express earnings in 2022 suggests growth of 1.1% from the figure released a year ago, while the consensus mark for the same has shifted towards north 0.3% over the past 60 days. AXP’s expected long-term profit growth rate is set at 20%, better than the industry average of 17.2%.

American Express shares are up 39.2% in one year compared to the industry’s growth of 17.6%.

Zacks investment researchImage source: Zacks Investment Research

Zacks Top 10 stocks for 2022

In addition to the investment ideas discussed above, would you like to know our top 10 picks for all of 2022?

From its creation in 2012 until November, the Top 10 Zacks stocks gained an impressive + 962.5% versus + 329.4% for the S&P 500. Now our research director combs through the 4,000 companies covered by the Zacks rankings to select the top 10 tickers to buy and hold . Don’t miss your chance to participate in these actions when they release on January 3.

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Mastercard Incorporated (MA): Free Stock Analysis Report

Visa Inc. (V): Free Stock Analysis Report

American Express Company (AXP): Free Inventory Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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Elaine R. Knight