As shopping has moved online amid the coronavirus pandemic, fintech stocks have been on the rise.
Last week, analysts at Mizuho initiated coverage on nine payment stocks, and said they were “most enthused” by names including Fisery (NASDAQ: FISV), PayPal (NASDAQ: PYPL), Square (NYSE: SQ), Visa (NYSE: V), and WEX Inc (NYSE: WEX).
All five of these stocks have been on a wild tear higher since the March 23 bottom. Fisery is up 34.5% since then. PayPal is up nearly 150% in the same time frame. Visa is up 56%. WEX is up 131.5%. And Square is up a whopping 233% since the market bottom.
But of the names in the fintech space, Laffer Tengler Investments’ Nancy Tengler says the biggest gainer of the bunch looks poised to see even more upside ahead.
Tengler said her firm sold Visa back in March, and then turned its attention on Square. While Tengler added that she’s still watching for a good entry point on the ever-rising stock, she says Mizuho is “absolutely correct on fintech” with cash transactions and ATM withdrawals on the decline.
She added that “the use of touches payment has gone up dramatically. So, we like this story. We like the fact that [Square] acquired approval for a bank, a de novo bank, and we think the model is the right one.”
Still, finding the right entry point in Square is difficult given its relentless run higher.
“If you aren’t in, it’s very difficult to step in here. However, we’ve seen it with many of these names that they continue to drive earnings growth, which is scarce in the market,” Tengler said.
“In the case of Square, the revenues are growing in the mid-40% range, the balance sheet is sound and solid with more cash than debt and they’ve started to put earnings on the board,” Tengler continued. “So, we look at relative price-to-sales ratio, and on that metric, it actually still is attractive. That’s how we purchased Tesla (NASDAQ: TSLA). So, I think you are ginger when you get in. You add some, you add a little more and you dollar-cost average. We’ll get a pullback at some point and that would be an opportunity, I believe.”
New Street Advisors Group’s Delano Saporu also has his eye on Square, and one other fintech name.
“I actually like PayPal and Square,” Saporu said. “The continued rise in digital payments is something that we’re going to see a lot more of, especially in the new normal where we’re trying to stay away from each other as much as possible.”
Saporu also pointed to PayPal’s recent agreement with CVS to add touches QR code technology to CVS’ locations as well as its deal with Walmart Canada, and says these deals are bullish for the stock.
“Square is also doing that on the small business front,” Saporu added. “They have a strong foothold there, so, that story continues. When you’re thinking about Venmo for PayPal and then CashApp for Square, they built a strong ecosystem, especially with young users who are really looking at that digital payments space, who are really entrenched in that.”