As businesses and consumers embrace cashless payments, the payment processing industry has emerged as the cornerstone of global commerce. Corporates and consumers are driving seamless financial transactions in an increasingly digital economy.
Amid this backdrop, you might consider investing in three quality processing payment stocks, American Express Company (AXP), Visa Inc. (V), and Mastercard Incorporated (MA), for robust growth opportunities.
With the rise of e-commerce, online retailers mainly depend on secure, fast, and reliable platforms to facilitate transactions; this has been a significant driver for payment processors. Furthermore, consumers across the globe have been adopting digital wallets or credit cards for their online purchases as they provide strong fraud protections and often offer rewards for spending.
Over the past years, the number of people who prefer credit cards has increased to 543.1 million in the first quarter of 2024, making it the most popular payment method. Moreover, the global payment processing solutions market is anticipated to reach $914.91 billion by 2034, exhibiting a CAGR of 20.3%. Also, the North American credit card transaction market is projected to grow at a CAGR of more than 5% by 2029.
Payment processing companies are innovating at a rapid pace, offering solutions like one-click payments, biometric authentication, and tokenization. These advancements not only enhance user experience but also ensure security, positioning such companies as indispensable players in the modern economy.
Given these promising trends, let’s look at the fundamentals of the three Consumer Financial Services stock picks, starting with number 3.
Stock #3: American Express Company (AXP)
AXP operates as a global integrated payments company that provides customers access to products, insights, and experiences that build a business. The company operates through four segments: U.S. Consumer Services; Commercial Services; International Card Services; and Global Merchant & Network Services.
On November 8, buoyed by strong financial performance, the company paid a quarterly dividend of $0.70 per common share. AXP pays an annual dividend of $2.80, which translates to a yield of 0.94% at the current share price. Its four-year average dividend yield is 1.18%. Moreover, the company’s dividend payouts have increased at an impressive CAGR of 16.2% over the past three years.
During the third quarter that ended on September 30, 2024, AXP’s total revenues net of interest expense increased 8.2% year-over-year to $16.34 billion, primarily driven by higher net interest income, increased card member spending, and strong card fees. In addition, its net income amounted to $2.51 billion and $3.49 per share, reflecting increases of 2.3% and 5.8% year-over-year, respectively.
Street expects AXP’s revenue for the fiscal fourth quarter (ending December 2024) to increase 8.5% year-over-year to $17.14 billion. Moreover, its EPS estimate of $3 for the same period indicates a 14.7% year-over-year growth. In addition, it surpassed the EPS estimates in three of the trailing four quarters, which is promising.
The stock has gained 76.7% over the past year and 58.9% year-to-date to close the last trading session at $297.68.
AXP’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
AXP has a B grade for Momentum, Stability, and Sentiment. It is ranked #14 out of 47 stocks in the Consumer Financial Services industry. Click here to see the additional ratings for AXP (Growth, Value, and Quality).
Stock #2: Visa Inc. (V)
V is a leading payment technology company that facilitates digital payments among consumers, merchants, financial institutions, businesses, strategic partners, and government entities internationally. The company offers its products and services under Visa, Visa Electron, Interlink, VPAY, and PLUS brands.
On October 24, V announced jointly working with the United States Agency for International Development (USAID) to improve access to open, secure, and inclusive digital government systems around the world. Under this agreement, V and USAID will work together for five years to develop programs aiming to promote economic development and growth that enhance transparency and efficiency between communities and governments.
In the same month, V entered into a strategic partnership with Analytic Partners, a global analytics solution provider, to address commercial challenges faced by merchants and brands, including improving the return on advertising investments with value-enhancing AI-driven data analytics. This partnership will help expand V’s global footprint and revolutionize commercial intelligence.
V’s net revenue for the fourth quarter (ended October 29, 2024) increased 11.7% year-over-year to $9.62 billion. Its operating income is $6.35 billion, indicating a 14.4% growth from the prior year's quarter. The company’s non-GAAP net income came in at $5.43 billion and $2.71 per share, up 12.6% and 16.3% year-over-year, respectively.
Analysts expect V’s revenue for the first quarter (ending December 2024) to increase 8.3% year-over-year to $9.35 billion, while its EPS for the same period is expected to grow 10.4% from the prior year to $2.66. Moreover, it topped the street EPS estimates in each of the trailing four quarters, which is excellent.
Over the past year, the stock has surged 20.1%, closing the last trading session at $307.02.
V’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Momentum, Stability, and Quality. Within the same industry, it is ranked #11. Click here to see the other V ratings for Growth, Value, and Sentiment.
Stock #1: Mastercard Incorporated (MA)
MA is a technology company that provides transaction processing and other payment-related products and services worldwide. It allows users to make payments by creating a range of payment solutions and services using its brands, MasterCard; Maestro; and Cirrus, through electronic forms of payment.
On November 25, MA and Unzer, a provider of payment and software solutions, entered into a strategic partnership that enhances open banking account-based payments to power e-commerce payments across Unzer’s payment gateways in Germany, Austin, and Denmark.
This partnership aims to create a unified digital payment ecosystem by leveraging MA’s Open Banking-driven solutions enabling access to pay by bank. The partnership will allow MA to enhance its market in Germany.
In the same month, NatWest and MA together launched a new mobile virtual card payment solution for business – Approval2Buy with Mobile Virtual Cards. This new service simplifies the ease of corporate payments around the globe with increased flexibility, control, and security.
For the third quarter of 2024, which ended on September 30, MA’s net revenues increased 12.8% year-over-year to $7.37 billion. Its operating income rose 4.2% from the year-ago value to $4 billion. The company’s non-GAAP net income stood at $3.59 billion, up 12.2% year-over-year, while its adjusted earnings per share amounted to $3.89, representing an increase of 14.7% from the last year.
The consensus revenue estimate of $7.41 billion for the fiscal fourth quarter (ending December 2024) represents a 13.2% increase year-over-year. The consensus EPS estimate of $3.70 for the same quarter indicates a 16.5% improvement year-over-year. The company has an excellent surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
MA shares have surged 26.8% over the past year and 16.2% over the past six months to close the last trading session at $522.79.
It’s no surprise that MA has an overall rating of B, equating to a Buy in our POWR Ratings system. It has an A grade for Quality and a B for Momentum and Stability. Out of 47 stocks in the Consumer Financial Services industry, MA is ranked #6.
Beyond what is stated above, we’ve also rated MA for Growth, Value, and Sentiment. Get all MA ratings here.
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V shares were trading at $311.73 per share on Tuesday afternoon, up $3.43 (+1.11%). Year-to-date, V has gained 20.65%, versus a 28.28% rise in the benchmark S&P 500 index during the same period.
About the Author: ShreyaRathi
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