Publicly Held Payments Companies Rewarded Investors in 2017’s First Half

The stock market has had a pretty good run so far this year, but shares of publicly traded payments firms are doing even better than the overall market.

A group of thirty payment-related stocks tracked by Chicago-based Barrington Research Associates Inc. posted a mean return of 23.86% for the first six months of 2017. That return bested three leading stock indices—the Nasdaq, up 14.07%, the S&P 500 Index, up 8.24%, and the Dow Jones Industrial Average, up 8.04%. The payments firms’ median six-month return was 17.63%.

Shares of 22 transaction processors increased in price and eight declined, according to the report. Many payments firms saw their stock rise after beating analysts’ profit expectations or not losing as much money as Wall Street expected.

Merchant acquirer Square Inc., for example, saw its share price surge 72% in the first half, the third best in the group. Analysts at the end of 2016 expected Square to lose 32 cents per share in 2017, but by June 30 estimates had improved to a loss of 19 cents per share.

“Basically what that’s telling you is that the business for the first six months of the year is performing better than analysts expected it,” Gary Prestopino, managing director and senior analyst at Barrington Research, tells Digital Transactions News. And forecasts in late 2016 of positive earnings of 6 cents per share in 2018 at Square have been revised upward to 9 cents.

Square’s stock surge comes as the company has been gradually moving toward profitability since its November 2015 initial public offering, after which its stock put on a “choppy” performance for a time as investors tried to assess the company’s long-term prospects, according to Prestopino.

The top performer in the first half was Las Vegas-based Everi Holdings Inc., whose stock rose 235%. Everi provides ATMs and payment and related services to casinos and the gaming industry. Next was Cyprus-based Qiwi plc, which offers payment services mostly in Russia and Eastern Europe, up 93%.

Taking fourth place was prepaid card services provider Green Dot Corp., whose shares rose nearly 64%. Coming off a proxy fight, the company’s financials have improved lately and its May acquisition of rival UniRush LLC is making a positive financial impact, according to Prestopino. “They’ve been beating the numbers,” he says.

On the other end, shares of ATM network owner and services provider Cardtronics plc turned in the worst performance of the group, off nearly 40% so far this year. The company is still absorbing the loss of its biggest customer, convenience-store chain 7-Eleven Inc., whose business was “very high margin,” says Prestopino. Despite acquisitions meant to gradually fill the 7-Eleven hole, recent financial guidance from the Houston-based company “was much less than the Street expected,” he says.

Second from the bottom was payment card manufacturer CPI Card Group Inc., whose shares fell 31% in the first half in part because of an “EMV overhang,” says Prestopino. Like some other industry vendors, CPI initially got a big lift as the U.S. converted in 2015 and 2016 from magnetic-stripe to EMV chip cards, but now is in a lull. CPI estimates, however, that about 35% of U.S. payment cards still are mag-stripe only, indicating that a big opportunity for chip card sales remains.

In related news, shares of Diebold Nixdorf Inc. plunged 23% on Wednesday after the ATM manufacturer revised its revenue and earnings projections downward. In a statement, Diebold said “the company’s banking business is increasingly made up of large, complex projects with higher software content, resulting in a longer customer decision-making process and order-to-revenue conversion cycle.”