KBW Examines a “A Quarter of Underperformance” for Mobile Payments

October 9, 2019         By: Steven Anderson

Recently, the folks at Keefe, Bruyette & Woods (KBW) sent out word our way of their 2019 third quarter payments preview, and what they had to offer in this preview raised some startling questions. What KBW referred to as “a quarter of underperformance” brought with it a lot to consider, but in the preview of their upcoming report, there were some potential answers afoot for the lag.

The KBW report opened by noting that payments stocks saw a substantial pullback in the third quarter, and in turn, may have just opened up a serious entry point for potential investors. It’s also poised to examine issues of consumer sentiment that may give the “laggards” a push in the market, and even notes that 2020 guidance and macroeconomic issues could push the whole field forward.

KBW also notes that several worthwhile data points will emerge as part of third quarter earnings reports. Being as we’ve only recently entered the fourth quarter, that means these figures have yet to arrive. KBW is projecting that the third quarter reports aren’t going to feature any nasty surprises, especially from the biggest firms like Visa and PayPal. Plus, KBW also notes that “deal stocks” are particularly attractive in the payments market, so some of these current “laggards” may catch some attention as possible deals.

KBW’s bottom line on this front, meanwhile, asserts that the payments stocks are actually looking pretty attractive after the pullback, and long-term growth expectations are still where they should be, about where they were back when second quarter reports emerged.

It’s worth noting we’re going into the fourth quarter now, and holiday shopping season makes up the bulk of that quarter. Not only are we going to have people get their Christmas and Hanukkah shopping started in a matter of weeks, but we’re also going to have people hitting grocery stores for their Thanksgiving shopping, and probably just about anywhere to stock up for trick-or-treaters at Halloween. There are a lot of opportunities for mobile payments to come into the scene and drive some serious upswing in the fourth quarter.

Still, with the overall economics looking pretty sharp, and many payments stocks now bargain-priced, a recovery going into the fourth quarter—or coming out of it—could well be ahead.