KBW Takes a Run at the 2020 Mobile Payments Market

December 13, 2019         By: Steven Anderson

When December comes around, you can expect two things like clockwork: Year in Review articles aplenty and Year to Come articles in like measure. You’ll be told all about the year that was and given at least some idea about what to expect in the year ahead. Our friends out at Keefe, Bruyette & Woods (KBW) are no different here, and recently sent word about Sanjay Sakhrani’s projections for 2020 to come.

The good news for Sakhrani’s 2020 in the payments sector is that the fundamentals look sound enough. While this outlook depends on a stable overall economic environment—which is far from a given these days—it only depends on things not suddenly turning disastrous. The outlook is different all over, of course; the US just saw an impressive new jobs report while word out of Canada is a little shaky, but that’s the standard all over. 

However, valuations seem to be a bit more of a problem than the fundamentals are right now. Sakhrani routinely fielded questions about valuations in payments-related stock issues, and now there are two forces acting on valuations in general. There’s the good news that is solid fundamentals, and there’s the less-than-good news of a shaky proposition for upward revisions.

There is still a chance for earnings revisions, Sakhrani points out, as Visa and Mastercard are looking solid as ever and Adyen could produce some positive results thanks to its recent growth patterns. Perhaps better yet, Sakhrani doesn’t even see much of a problem resulting from the upcoming 2020 elections, which are poised to shake just about everything else to the ground.

This is a perfectly reasonable stance; while the 2020 elections will certainly destabilize just about everything—especially if there’s a serious sea change in the presidency—the chances of this immediately impacting macroeconomic conditions is fairly slim. After all, there will still be about two months left of Trump’s administration before whatever Democrat would win would take office. 

Still, Sakhrani’s suggestions hold some water here; the basics of payments seem to be holding up well, even if that’s not quite extending to stock valuations just yet. Admittedly, counting on a stable macro environment might seem like a bad plan, but Sakhrani’s outlook going forward has its share of merit.