• 21 hours The Year Of The Retail Investor Keeps Getting Bigger
  • 2 days Airlines Could Recover, But Crew Remain Elusive
  • 2 days Meet The Man Behind The World's Most Exciting Oil Play
  • 3 days Crypto-Mining Immigration Could Be The Start Of A New Trend
  • 5 days Hawkish Fed Sends Gold Prices Crashing
  • 6 days Bezos Is Heading To Space This Sunday
  • 9 days El Salvador’s Surprise Bitcoin Move
  • 12 days Markets Unfazed As Inflation Hits 13-Year High
  • 13 days How the Token Economy is Disrupting Financial Markets
  • 15 days FBI Investigating 100 Types Of Ransomware Attacks
  • 17 days Fed Ends Corporate Credit Emergency Lending Program
  • 19 days AMC Becomes the Latest Winning Meme Stock After GameStop
  • 20 days The Real Reason Your 401k Has Been Lagging
  • 21 days China Lifts Cap On Births, Allows Three Children Per Couple
  • 23 days The Market Is Ripe For Another GameStop Saga
  • 26 days Senate Grills Big Banks Over Pandemic Opportunism
  • 27 days Cannabis Has A Major Cash Problem
  • 28 days Ransomware Netted Criminals $350M In 2020 Alone
  • 29 days Russia Is Taking On Google
  • 30 days Chinese Regulators Deal Another Big Blow To Bitcoin
Tech Majors Bet Big On Clean Energy

Tech Majors Bet Big On Clean Energy

In recent years, Big Tech…

The 3 Most Profitable Covid-19 Vaccine Stocks

The 3 Most Profitable Covid-19 Vaccine Stocks

Wall Street is expecting total…

  1. Home
  2. Investing
  3. Stocks

Will These Fintech Originators Replace FANG Stocks?

Credit

High-flying tech stocks may be losing their FANGs, and payments giants such as Visa and PayPal are suddenly looking a lot more attractive, according to Reuters, which says tech-heavy U.S. fund managers are having a bit of a change of heart.

Fund managers are now noting that PayPal, Visa and Mastercard, for instance, not only have valuations that make sense, but they also have above-average growth.

In other words, the recent market volatility saw these payments giants hold onto more gains, Reuters said, citing fund managers.

That echoes what Morgan Stanley analysts recently told clients: It may be time to refocus on value stocks, rather than high-flying growth stocks that get a high valuation in terms of the price investors are asked to pay for things like book value or asset value, subtracting net debt.

Value stocks trade at lower prices relative to their fundamentals, and while they may not seem as attractive in a bull market, Morgan Stanley is signaling a coming “regime change” as we reach a “tipping point” in the cycle.

While Morgan Stanley favors energy, utilities and financials, U.S. fund managers Reuters talked to are looking keenly at the payments sector specifically.

And now it’s about who’s lost the least. As Reuters points out, Facebook lost 30 percent over the past three months and Alphabet (the parent of Google) lost 13.5 percent, while Visa lost only 2.9 percent over that same time period.

As The Street notes, “the sell-off that is sending shares earthbound might be only a momentary detractor from secular plays like PayPal (PYPL) and Square (SQ) that are falling victim to short term cycles.”

And Visa has had a stellar fiscal fourth quarter. On Wednesday, Visa said its fiscal fourth quarter profits rose by 33 percent from a year earlier, thanks both to a lower tax rate and more payments processed. Profits were $2.85 billion, up from $2.145 billion from a year earlier—beating analyst expectations. Related: Stock Market Plunge Fails To Impact Gold Prices

The company said it paid $693 million in income taxes during the quarter—down significantly from $959 million for the same quarter 2017, and even though this year has seen pre-tax profits rise 14 percent.

PayPal has seen similar strong results.

(Click to enlarge)

PayPal’s Q3 2018 results released on October 18 showed revenue growth of 14 percent to $3.68 billion. The company processed $143 billion in total payment volume for the quarter, representing 24-percent growth.

This is a great growth story, even if it doesn’t sound as exciting as the FANG set-up that has captivated the bull market for so many years but is now showing risk cracks.

Related: MIT Invests $1 Billion In Artificial Intelligence

For PayPal, there’s plenty to like even before the revenue figures because it managed to add 9.1 million net new active customers, presenting 11-percent growth year-over-year. PayPal now has a customer base of 254 million, which is up 15 percent over the same quarter last year.

Now, we’re waiting on MasterCard, which is expected to release earnings on October 30.

“Right now we’re certainly looking at a test of the past (market) leadership and some of these FANG stocks have gotten ahead of themselves,” Tom Plumb, portfolio manager of the Plumb Equity fund, told Reuters.

“We’re looking with companies that have high recurring revenue and high growth, and not a lot of companies are in a better spot than the payments space.”

By David Craggen for Safehaven.com

More Top Reads From Safehaven.com:

Back to homepage

Leave a comment

Leave a comment