Morgan Stanley Upgrades FinTechs, Payment Companies
Morgan Stanley is apparently still taking a shine to the FinTech sector despite downgrading the broader tech sector just a week ago. As MarketWatch reports, Morgan Stanley’s James Faucette recently upgraded the payments industry on the whole to “attractive,” even declaring, “These are some of the best businesses there are.”
The upgrade comes as a number of payments companies — both traditional and younger — have seen big gains. Barrons notes that Visa is up 23% so far this year, Mastercard is up 36%, PayPal has gained 20%, and Square’s year to date growth has topped 100% at times. Faucette suggests that this trend is likely to continue, also saying that Wall Street “is underestimating the secular push from digitization.” Beyond the aforementioned names, Morgan Stanley is also said to be bullish on Worldpay Inc., FleetCor Technologies Inc., and GreenSky Inc. — a third-party financing company which just went public in May of this year.
As it happens, Faucette isn’t the only one showing enthusiasm for the FinTech’s market prospects. Paul Condra of Credit Suisse also recently spoke on the sector, saying “Amid volatile market conditions, our FinTech universe has been a relative safe haven year-to-date, outperforming the S&P 500 and both financials and tech.” He went on to say, “We believe sentiment toward the space remains largely positive given the potential for continued growth, margin expansion, cash return, M&A and a relatively defensive posture.”
Sadly Morgan Stanley’s latest moves weren’t all good news for FinTech. Faucette also downgraded two online lenders: OnDeck Capital and Lending Club. The former was bumped down to “underweight” from “even weight” while the latter is now “even weight” from “overweight.” Both stocks have struggled since the early days of their IPOs, which happened around the same time in late 2014.
Even though Faucette’s endorsement is mainly directed at a more specific area of the larger FinTech sector, the upgrade is still notable considering the rough go many startups have had (and continue to have, as the downgrade of OnDeck and Lending Club shows) on the markets in recent years. Moreover both Faucette and Condra note the long-term potential of the space at a time when many investors seem to get wrapped in the day-to-day news surrounding a company or their quarterly earnings. Overall Morgan Stanley’s “attractive” upgrade is a nice boost to sector and perhaps a sign of more good things to come.