The year 2021 was a boom for the online payments industry, as the world rushed to adopt digital commerce solutions. Since then, payment stocks have plunged in value as business momentum slowed.
But investors shouldn’t throw out the baby with the bathwater. Online commerce will continue its inexorable growth, albeit perhaps at a slower rate, and the firms making that possible stand to benefit. These three payment stocks, in particular, are set to profit from e-commerce, digital wallets and other such emerging trends.
Global Payments (GPN)
Global Payments (NYSE:GPN) is a financial services company that has three main operational categories: merchant solutions, issuer solutions, and consumer solutions.
Its merchant business is the firm’s bread-and-butter, accounting for around two-thirds of revenues. In short, Global Payments provides all the infrastructure for retailers to accept customers’ funds, provide accounting and tax functions, manage fund safety and security and so on.
Global Payments is focused on delivering the omnichannel shopping experience. Whether customers want to pay with a card in a physical store, buy online with a card, or use newer options such as digital wallets, Global Payments gives merchants the tools to make that a frictionless experience.
GPN stock rallied in 2023 so far, with shares rising about 25% year-to-date. Regardless, the firm remains dirt cheap at 12 times its fast-growing earnings. Morningstar’s Brett Horn sees fair value at $179 per share, offering massive upside versus today’s price.
PayPal (NASDAQ:PYPL) went from an absolute trader darling to a total pariah over the past two years. Shares plunged from a peak of more than $300 in 2021 to barely $60 per share today.
It’s not hard to see what went wrong. The adoption of e-commerce and touchless payment solutions slowed after the initial boom during the early days of the pandemic. Competition also got more fierce within the industry. Meanwhile, PYPL stock was trading at a lofty valuation in 2021, and that has come in sharply as well.
However, I’d argue this may be an overreaction in the opposite direction today. While PayPal’s operational momentum has slowed a bit, this is still a growth company now selling at a value price.
Analysts see the company’s revenues rising around 8% to nearly $30 billion this year, with that jumping to $32 billion in 2024 and even higher over the next five years. Earnings per share are set to rise nearly 20% this year and grow at double-digits in future years as well. Meanwhile, shares are now going for just 12 times forward earnings. PayPal may be a fallen giant, but it’s far from being a hopeless one.
Paysafe (NYSE:PSFE) is a smaller company offering investors a great deal of exposure to the mobile and digital wallet ecosystem.
The firm came about as a digital-first payments solution seeking to create technology to handle fast-evolving new categories such as online gaming, digital gift cards and online cash and money transfer solutions. Among these fields, it operates digital wallets, allowing customers to move funds and buy things online in a secure manner. Paysafe even supports more specialized functions such as operating embedded digital wallets for online trading of financial assets like cryptocurrency.
Paysafe went public via a SPAC at a high valuation, as was common a few years ago. With PSFE stock now down nearly 90% from its initial price, however, shares have become a reasonable bet.
That’s especially true as the firm swung to profitability on an earnings-per-share basis and it continues to grow the top-line at a respectable rate. With a market cap of just over $800 million, shares now sell at a sharp discount to the firm’s $1.5 billion in annual revenues.
On the date of publication, Ian Bezek held a long position in GPN stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.