Mizuho USA’s top fintech payment picks for 2024 (NYSE:FIS)

Affirm Holdings (NASDAQ:AFRM), Fidelity National Information Services (NYSE:FIS), Robinhood (NASDAQ:HOOD), and Block (NYSE:SQ) are Mizuho Securities USA’s top picks for the fintech payment sector for 2024. Meanwhile, analyst Dan Dolev is more cautious on Coinbase Global (COIN) and Toast (TOST).

The analyst points to four key trends in 2024:

1. Payment networks Visa (V) and Mastercard (MA) have a good track record of performing well during difficult macroeconomic circumstances, but “potential disruption looms from the likes of FedNow and other account-to-account payment schemes, which may nibble at the networks’ top-line growth over time,” Dolev wrote.
2. In the merchant acquiring space, vertical specialization was a main theme for 2021 and 2022, especially for Toast (TOST), which caters to the restaurant industry. However, Dolev believes distribution capabilities will be a key competitive advantage for long-term growth, with Fiserv’s (FI) Clover standing out in that capacity. Other merchant aquiring business are Block’s (SQ) Square and Shift4 Payments (FOUR).
3. In lending technology and consumer finance, delinquencies are continuing to inch higher, but Mizuho expects investors will start to focus on the lower rate environment in H2 2024. LendingClub (LC) said conversations are starting to shift from “backward-looking” credit challenges to “forward-looking” opportunities. That bodes well for stocks like Affirm Holdings (AFRM) and SoFi Technologies (SOFI), Dolev said.
4. Cryptocurrency: In the last quarter of 2023, the prices of bitcoin (BTC-USD) and many bitcoin-exposed stocks surged in anticipation that the Securities and Exchange Commission would approve the first spot bitcoin exchange-traded funds. However, activity levels have stayed well below prior cycle peaks, the analyst said. “We expect fundamentals (as they pertain to COIN) to come back into focus in ’24, which is likely to reset the bar lower for over-earning pure-play crypto exchanges like COIN, while HOOD is likely to benefit from strong execution and an improved trading environment.”

Dolev makes the following observations on his top picks for 2024:

• Affirm Holdings (AFRM): He considers the Affirm Card to be a game-changer to credit payments and is “highly bullish on the opportunity to bring BNPL/hybrid debit/credit to brick and mortar through the card.” He’s also bullish on the opportunity for Affirm’s transactional account.
• Fidelity National Information (FIS): After its Worldpay divestiture, “expect improved stability over time to be a key feature of the FIS investment thesis. 2024 EPS is likely to be better than feared.”
• Robinhood (HOOD): “Share gains in retail trading across products should ensue as improved sentiment benefits equity and options trading.” Dolev also points to new products and geographic expansion into the U.K. and Asia. New products like advanced trading, retirement accounts, and credit/debit card can fuel positive earnings estimate revisions over time, he reasoned.
• Block (SQ): “Our bottom-up ecosystem models point to SQ comfortablty achieving at least mid-teens GP growth in ’24. This coupled with upside to the $2.4B EBITDA guide, presents an attractive opportunity at these valuations.”

For payment stocks with market cap over $2B, the SA Stock Screener’s top picks are StoneCo (STNE), Block (SQ), PagSeguro Digital (PAGS), and Shift4 (FOUR).