Analysts are bullish on digital payment processing firms such as Square and Discover Financial Services.
But at the same time, some are bearish on established payment companies. UBS has downgraded American Express to a sell as it sees a slow recovery for the company. Oppenheimer has downgraded Mastercard to market perform.
Warren Buffett’s Berkshire Hathaway is the largest shareholder in American Express. It also holds small stakes in Mastercard and Visa. Chairman Buffett has also bet on new fintech players by investing in Brazil-based StoneCo and India based Paytm. American Express stock is down 19.4% in 2020 while StoneCo is up 4.1%.
While Michael Binger, president of Gradient Investments is bullish on Mastercard, he is buying into Discover Financial Services. “This is really a contrarian play. It’s more consumer oriented and it benefits as the consumer spending recovers – we think it is. Low valuation, a dividend yield of 3.2%, and by the way UBS did upgrade Discover Card [Monday] and we liked that upgrade,”Binger told CNBC on Monday.
Discover Financial Services stock is down 34% year to date while Visa and Mastercard have gained 5.7% and 3.1% over the period, respectively.
The mood of the analysts was not shaken by the arrest and bail this week of Markus Braun the former boss of German payments firm Wirecard over €2bn has gone missing from its account.
The former stock market darling has seen its shares plummet 85% this year.
Oppenheimer is bullish on Square stock
Ari Wald, head of technical analysis at Oppenheimer is generally bullish on mobile payment industry and believes Square can continue to outperform. Square stock has almost doubled in the second quarter and is up 67% this year, outperforming the S&P 500, which is down just over 5%.
According to Wald, Square broke out this month after it rallied above $83 and the uptrend has continued with the stock crossing its 2018 peak.
Wald added: “So between this 18-month breakout in price, bullish momentum behind the stock and a bullish sector as well, these top-down portfolio tailwinds, we see additional upside for the stock price of Square.”