Huge Holiday Spending Could Mean Massive Volume for Top Payment Stocks

By Lee Jackson Published Dec 1, 9:45AM EST

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With the economy finally starting to show a degree of strength we haven’t seen in years, many on Wall Street are expecting a banner year for the payment companies that benefit from the holiday shopping season. With the third-quarter gross domestic product coming in at a sparkling 3.3%, which was above estimates, consumer confidence is also at the highest levels in years. All these positives mean many consumers feel good about opening up their wallets for the holidays, and spending is expected to jump, as the early results show it already has.

The top payment processing companies will be one of the big benefactors of the strong retail sales, and increased volume will mean increased revenue. With the leading companies in the industry all having posted strong third-quarter results, it’s a solid bet that the fourth quarter will also be very positive. JPMorgan rates three top companies Overweight, and all make sense for investors with long-term growth portfolios looking for stable and dependable stocks to add.

Mastercard

This continues to be one of the top credit card players in the world. Mastercard Inc. (NYSE: MA) is a global payments provider that operates one of the largest payment processing networks, connecting billions of consumers, millions of merchants, and thousands of financial institutions in more than 210 countries. Its brands include Mastercard, Maestro and Cirrus.

The company also provides value-enhancing offerings such as loyalty and rewards programs, information services and consulting. According to Nilson estimates, Mastercard is the third-largest global credit and debit network, as measured by volume.

Shareholders receive a small 0.6% dividend. The JPMorgan price target is for the shares $160. The Wall Street consensus price objective is $162.41, and shares traded early Friday at $150.30.

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Visa

This top credit card issuer is becoming a huge leader in digital pay. Visa Inc. (NYSE: V) operates the world’s largest retail electronic payments network. The company provides processing services and payment product platforms, including consumer credit, debit, prepaid and commercial payments, that are offered under Visa and related brands. According to Nilson estimates, the company is the largest global credit network (as measured by volume) and the second largest global debit network.

Visa is not a bank and does not issue cards, extend credit or set rates and fees for consumers. Visa’s innovations, however, enable financial institution customers to offer consumers more choices: pay now with debit, pay ahead of time with prepaid or pay later with credit products.

Shareholders are paid a 0.7% dividend. JPMorgan has a $123 price target, and the consensus target is $122.70. The shares were last seen trading at $111.15.

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PayPal

This stock has long been a Wall Street favorite and continues to deliver solid results. PayPal Holdings Inc. (NASDAQ: PYPL) operates as a technology platform company that enables digital and mobile payments on behalf of consumers and merchants worldwide.

PayPal enables businesses of various sizes to accept payments from merchant websites, mobile devices and applications, as well as at offline retail locations through a range of payment solutions across company’s payments platform, including PayPal, PayPal Credit, Venmo and Braintree products. Its platform allows customers to pay and get paid, withdraw funds to their bank accounts and hold balances in their PayPal accounts in various currencies.

The JPMorgan price objective is an odd $69, as the posted consensus estimate is $79.91. The shares traded at $75.95.

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These three top payment processing companies all stand to stay perched ahead of the competition due to their outstanding share of the marketplace. They also remain somewhat immune to downturns as people use their services almost regardless of the economy, although volumes can suffer in a downturn. All three make good additions to long-term growth portfolios.

About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.