The digital payments market is one of the largest and fastest-growing businesses within the finance and tech sectors. Adoption of digital payments over traditional cash and credit cards accelerated during the pandemic in 2020 and 2021.
The adoption of digital payments has also coincided with the transition of the global retail sector from brick-and-mortar stores to online sales. Technavio estimates the global digital payments market will grow by 17.4% annually through 2026, increasing in value by $85.1 billion in that time period.
Bank of America recently named the following five stocks its top digital payment plays for investors in 2022.
Mastercard Inc (NYSE:MA)
Mastercard is a leading global technology-focused payment network and traditional credit card giant. Analyst Jason Kupferberg says Mastercard's fourth-quarter results were "robust" and the outbreak of the omicron variant of COVID-19 has had limited impact on Mastercard's business. Kupferberg says Mastercard's fiscal 2022 guidance is in-line with its three-year targets and consensus expectations. Finally, he says Mastercard is positioned to generate above-average earnings growth in a normalized environment and the company has a quality business model and flexible cost structure.
Bank of America has a Buy rating and $416 price target for MA stock.
Visa Inc (NYSE:V)
Shares of global digital payments and credit card processor Visa have lagged both the S&P 500 and competitor Mastercard over the past year, but Kupferberg says Visa is positioned for a big year in 2022. In January, Visa exceeded market expectations with a fiscal first-quarter earnings beat and fiscal 2022 guidance hike. Kupferberg says omicron has had limited impact on Visa's business, and pandemic headwinds are likely to abate starting in February. Visa is now expecting cross-border travel to return to 90% of pre-pandemic 2019 levels by the end of fiscal 2022.
Bank of America has a Buy rating and $279 price target for V stock.
Affirm Holdings Inc (NASDAQ:AFRM)
Affirm is a leading Buy Now, Pay Later (BNPL) provider that serves more than 7.1 million customers, primarily in the U.S. and Canada. Kupferberg says Affirm's 61.6% sell-off in the past three months is a buying opportunity for long-term investors and has been driven by a broad rotation out of high-growth tech stocks and concerns about the company's ability to navigate a potential recession or dip in the credit cycle. He says near-term risks have been overly discounted by the sell-off, and Affirm is a top performer in the BNPL space.
Bank of America has a Buy rating and $125 price target for AFRM stock.
Fidelity National Information Servcs Inc (NYSE:FIS)
Fidelity National provides software, services and outsourcing technology to the financial services industry. Kupferberg says the stock's current price represents a favorable risk-reward skew for investors. He's projecting 8% revenue growth in 2022 and 7.5% revenue growth in 2023. The analyst says potential merger and acquisition deals are the biggest wildcard for investors after the company updated its capital deployment strategy in late 2021 to include potential deals that can help accelerate organic growth. In addition, Fidelity National increased its annual dividend growth from 10% to 20%.
Bank of America has a Buy rating and $142 price target for FIS stock.
Paypal Holdings Inc (NASDAQ:PYPL)
PayPal is a global payment platform that specializes in digital and mobile payments. Kupferberg says a combination of inflation, stimulus expiration and supply chain disruptions create headwinds for e-commerce spending in 2022, which is bad news for PayPal. However, he says these risks are adequately reflected in PayPal's share price, which is down 46.2% in the past three months. He remains bullish on the stock in the long-term given PayPal's strong growth and margin profile, as well as its potential for lower expense growth and positive operating leverage.
Bank of America has a Buy rating and $175 price target for PYPL stock.
Also Read: 7 Of The Best Nasdaq Stocks to Buy On The Dip
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