Piper Sandler Names Top Payment Stocks to Watch

Piper Sandler analyst Bill Carcache has launched coverage of the payments and consumer finance sector, adopting a selectively constructive stance. Visa, Mastercard, American Express, Capital One, and Affirm have been assigned Overweight ratings. The analyst also initiated PayPal at Neutral and upgraded Block to Overweight from Underweight.

Carcache noted that valuation compression in the sector is primarily due to multiple contraction rather than declining earnings. Visa and Mastercard, though facing skepticism regarding slowing "electronification" trends, are supported by robust value-added services contributing significantly to annual revenue.

American Express is recognized as a strong compounder in consumer finance, demonstrating high returns on equity. Capital One is favored for its potential transformation following the Discover acquisition, which is expected to boost returns and reduce credit loss content.

Block received an upgrade to Overweight, cited for its potential for double-digit gross profit growth and margin expansion, making it a notable S&P 500 company. Affirm was initiated at Overweight, viewed as a growing BNPL platform with a clear path to profitability and improving credit metrics.

PayPal remains a Neutral rating, characterized as a "show-me" story due to a decade of decelerating growth and earnings revisions, with transaction rate compression offsetting positive volume mix.