The coronavirus pandemic has accelerated adoption of contacts payments and e-commerce, and that’s good news for fintech stocks.
That’s according to Goldman Sachs, which initiated coverage of a slew of fintech stocks this week, giving Buy ratings to 7 such stocks.
Goldman said that Mastercard could outperform rivals given its relatively greater presence in under-penetrated markets including Europe.
Analyst Matthew O’Neill added that Mastercard’s growth in its core consumer card segment is “likely to outpace peers given exposure to Europe and growth markets where MA is gaining share,” and pointed to the credit card giant’s pending acquisition of Danish payment company Nets, which O’Neill said could accelerate Mastercard’s position in the region.
Goldman issued a $364 price target for Mastercard shares – nearly 22% higher than the price as of this writing.
As for Fiserv, Goldman says the stock is their top pick among digital payment processors, with stable growth and cost efficiency the key to its valuation.
“We believe FISV has one of the most defensive business models in our coverage given a majority of revenue is derived from services which are critical to support bank operations and less sensitive to the macro environment,” O’Neill said, adding that the cost synergy after the integration of First Data, which Fiserv purchased last year for $22 billion, is a positive sign for accelerated growth.
The analyst has a price target of $125 on Fiserv shares, indicating possible upside of around 26%.
Other fintech stocks Goldman issued Buy ratings for included credit card heavyweight Visa (NYSE: V), “deal stocks” Fidelity National Information Services (NYSE: FIS) and Global Payments (NYSE: GPN) given aggressive M&A activities in the payment processing space, automated near-prime loan platform Open Lending (NASDAQ: LPRO), and business payments firm FleetCor Technologies (NYSE: FLT).
Goldman didn’t rate all fintech stocks a buy.
The firm issued a Neutral rating for Square (NYSE: SQ) citing its overvaluation and over confidence in Square’s Cash App.
Investors have pushed the stock nearly 92% higher this year on hopes that its Cash App, Square’s digital wallet product, will continue to generate more revenue as millions of consumers create new accounts amid the pandemic.
“Consensus Cash App enthusiasm could prove too optimistic near-term, driving a shift in focus towards SQ’s core Seller Business which has been significantly impacted by the pandemic,” O’Neill said.
The analyst also issued Neutral ratings for Euronet Worldwide (NASDAQ: EEFT), EVO Payments (NASDAQ: EVOP), Evertec (NYSE: EVTC), and Wex (NYSE: WEX), and Sell ratings for Automatic Data Processing (NASDAQ: ADP), Paychex (NASDAQ: PAYX), and Western Union (NYSE: WU).