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Capitalize on Digitalization With These Top 3 Payment Stocks

Payment technology stocks have experienced significant growth in recent years. The pandemic spurred increased demand for digital payment technologies, benefiting companies with extensive networks from the surge in transaction volumes. As pandemic restrictions have eased, payment volumes have risen each quarter. Despite ongoing inflationary pressures, consumer spending has remained robust, further driving up payment volumes.

New innovative payment methods, such as buy now, pay later solutions and cryptocurrencies, have helped consumers remain resilient during macroeconomic volatility and in a high-interest-rate environment. The lifting of pandemic restrictions has also increased cross-border volumes due to the resurgence in travel and entertainment related spending.

Additionally, the growth in international trade is boosting volumes and international transaction revenues for payment companies. Given this backdrop, companies with expanding digital capabilities are poised to benefit the most. The rapid digitalization of economies and transactions has underscored the importance of investments in cybersecurity, fraud prevention, and network expansion. Hence, companies are spending more on these fields to stay ahead of their peers.

As more economies enhance their digitalization efforts, with much more still to come, especially in developing countries, the momentum is likely to persist. To capitalize on the growth in the payments sector, one could use this momentum as an investment opportunity.

Our Top Picks

We have narrowed down our search to three stocks having substantial growth potential, with the help of the Zacks Stock Screener, each boasting a Zacks Rank #1 (Strong Buy) or #2 (Buy), a VGM Score of A or B, and a market cap exceeding one billion dollars. Here V stands for Value, G for Growth and M for Momentum; the score is a weighted combination of these three metrics, which enables you to eliminate the negative aspects of stocks and select winners. The stocks are: Global Payments Inc. GPN, The Western Union Company WU and Paysafe Limited PSFE.

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You can see the complete list of today’s Zacks #1 Rank stocks here.

Western Union: It has made significant investments to develop a strong digital arm, enabling fast and affordable money transfer services. A key advantage is the reallocation of its digital marketing budget from regions with lower returns to North America, where new customer acquisition is more cost-effective. Additionally, its Global Strategy aims to enhance efficiency, profitability and long-term revenue growth, further boosting its performance.

WU has implemented significant enhancements to its point-of-sale system, including features like quick resend and remember me, which have led to improved transaction volumes. Even in the first quarter, its strategic initiatives resulted in double-digit growth in branded digital transactions. The growth in operations allows the company to prioritize shareholder value, as evidenced by its actions last year. In 2023, Western Union rewarded shareholders with a total of $646 million ($346 million in dividends and $300 million in share buybacks). As of Mar 31, 2024, it still had $198.2 million remaining in its share repurchase authorization through the end of 2024.

The Zacks Consensus Estimate for WU’s 2024 bottom line indicates 1.2% year-over-year growth. It beat earnings estimates in each of the past four quarters, with an average surprise of 15.7%. the consensus mark for 2024 revenues is pegged at $4.2 billion. It currently sports a Zacks Rank #1, a VGM Score of B and a market cap of nearly $4.4 billion. Shares of Western Union have gained 9.8% in the past year.

The Western Union Company Price and EPS Surprise

The Western Union Company Price and EPS Surprise
The Western Union Company Price and EPS Surprise

The Western Union Company price-eps-surprise | The Western Union Company Quote

Global Payments: Its Merchants Solutions business is benefiting from its innovative payment facilitation model and the increasing demand for its point-of-sale solutions. The Issuer Solutions business is expected to see growth driven by a strong conversion pipeline, account expansion, and increasing transactions. The company prioritizes top-tier strategic partnerships to drive business growth and ensure the longevity of its technology infrastructure. Additionally, it pursues acquisitions to bolster its overall business by enhancing its technology platform.

Global Payments boasts a robust investment-grade balance sheet and steady free cash flow generation, offering ample capital and financial flexibility. This enables the company to invest in its business and deploy capital wisely. In the first quarter of 2024, it returned around $800 through share repurchases and paid $63.6 million in dividends. As of the end of the quarter, its share repurchase program still had nearly $1.5 billion remaining.

The Zacks Consensus Estimate for GPN’s 2024 bottom line indicates an 11.6% increase from the prior-year period. It beat earnings estimates in each of the past four quarters, with an average surprise of 1.1%. The consensus mark for 2024 revenues is pegged at $9.2 billion, marking 6.4% growth from year-ago levels. It currently has a Zacks Rank #2, a VGM Score of B and a market cap of almost $26.2 billion. Shares of Global Payments have gained 2.8% in the past year.

Global Payments Inc. Price and EPS Surprise

Global Payments Inc. Price and EPS Surprise
Global Payments Inc. Price and EPS Surprise

Global Payments Inc. price-eps-surprise | Global Payments Inc. Quote

Paysafe: The increasing total value of transactions processed through the company's platform will remain a key driver of its top-line growth. By expanding its sales team and enhancing its go-to-market capabilities, the company signals further untapped growth opportunities ahead. Additionally, PSFE’s strategic focus on the forex market in Latin America, penetration in the online gaming space, digital wallet solutions and other initiatives will position it for long-term growth.

Its fraud and risk management tools, data and analytics services set it apart from its competitors. Strategic partnerships, such as those with Mastercard and Xsolla, further enhance its security and service offerings. In the first quarter, the company returned $14 million through share buybacks, and as of Mar 31, 2024, it still had approximately $36 million remaining in its repurchase fund.

The Zacks Consensus Estimate for PSFE’s 2024 bottom line indicates a 6% increase from the year-ago period. It beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 18.3%. The consensus mark for 2024 revenues is pegged at $1.7 billion, indicating 6.5% growth from the year-ago figure. It currently has a Zacks Rank #2, a VGM Score of A and a market cap of more than $1.1 billion. Shares of Paysafe have jumped 89.8% in the past year.

Paysafe Limited Price and EPS Surprise

Paysafe Limited Price and EPS Surprise
Paysafe Limited Price and EPS Surprise

Paysafe Limited price-eps-surprise | Paysafe Limited Quote

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

The Western Union Company (WU) : Free Stock Analysis Report

Global Payments Inc. (GPN) : Free Stock Analysis Report

Paysafe Limited (PSFE) : Free Stock Analysis Report

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