Block, Global Payments get Overweight ratings at Stephens amid fragile backdrop
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Stephens has initiated coverage of five large cap payment providers, rating Block (NYSE:SQ
-7.8%) Global Payments (GPN
-0.9%) and Fidelity National Information Services (FIS
-1.4%) at Overweight and PayPal (NASDAQ:PYPL
-5.3%) and Fiserv (FISV
-0.1%) at Equal Weight.
Block (SQ) and Global Payments (GPN) were initiated with a $170 price target, Fidelity (FIS) at $125, PayPal (PYPL) at $135 and Fiserv (FISV) at $110.
Analyst Charles Nabhan kept a "cautious" stance on the sector: "While the fragile economic backdrop and highly competitive environment remain headwinds, we believe risk/reward has improved considerably given deeply discounted valuations in the space." He also highlighted secular tailwinds including payments digitization and demand for value-add solutions.
For Block (SQ), Nabhan noted, "We view execution against a substantial TAM across Cash App & Seller serves as a catalyst for multiple expansion. SQâs 2-sided network is a differentiator in the highly competitive FinTech and SMB space, and Afterpay is a driver of synergies and connector between the 2 eco-systems."
For Global Payments (GPN), he cited a "tech-enabled strategy (eCommerce, owned-software) + exposure to high-growth channels (hospitality, B2B) drive share-gains, and 700bps+ outperformance relative to network credit volume growth further solidifying outlook."
On Fidelity National Information (FIS), he cites a "defensive play within acquirer group via recurring revenue concentrations in Banking and Capital Markets (~65% of revenue), as well as non-discretionary, enterprise retailers within merchant solutions."
As for PayPal (PYPL), Stephens views "eCommerce and digital wallet adoption as secular tailwinds and believe the solution-set is in place to drive ARPU engagement, but await further evidence of execution before taking a constructive view of shares."
On Fiserv (FISV), "While we are constructive on outlook for payments driven by Clover, intâl expansion and growth in e-Commerce, we believe the recent outperformance in shares and premium valuation versus peers (despite a discount vs. historic levels) reduce the likelihood of outperformance."
Nabhan's Overweight rating on Block (SQ) compares with the SA Quant rating of Hold and aligns with the average Wall Street rating of Buy. Take a look at how Block's key stats compare with those of its peers here.
On Tuesday, Wells Fargo reinstated PayPal (PYPL) and Block (SQ) at Overweight on share gains, growth initiatives