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Publicly-held merchant acquirers were the best-performing payments stocks of 2015, investment-advisory firm Keefe, Bruyette & Woods says in its “2016 Outlook: Pay for Growth in This Environment” report released Tuesday.
Among the acquirers and processors KBW tracks are PayPal Holdings Inc., Global Payments Inc., Vantiv Inc., Heartland Payment Systems Inc., and Total System Services Inc. (TSYS).
“2015 was a banner year for the merchant acquirers in our coverage universe with the group average stock performance up 60% year-to-date, which handily outperformed the other sectors within our cards/payments coverage along with both the S&P 500 and financial indexes,” KBW says in the report.
In comparison, performance in the payment card issuer segment has been a negative 7% year-to-date. The card networks are up 19% in the period.
Merchant acquirers benefited from a focus on integrated payments, “which has been growing rapidly in the high-teens rate and displacing the legacy ISO channel where the growth has been closer to flat to low-single-digit range,” KBW says. “Furthermore, there remains a lot of opportunity for growth in the integrated payments space as the market penetration is less than 10%.”
As for 2016, KBW, which is a unit of St. Louis-based Stifel Financial Corp., forecasts that growth stocks, including acquirers, will headline the upcoming 12 months. In 2015 “these companies manufactured growth through high levels of capital return and [mergers and acquisitions], enhancing shareholder value in these types of environments.”
