In light of the recent Wirecard scandal and its insolvency filing, here are 3 top companies that represent potentially great investments in the payment space
Dubbed ‘the Enron of Germany’, Wirecard’s accounting scandal has rocked the European fintech scene and raised many questions about corporate governance. With $2.2 billion missing from its books, its founder arrested, and the company filing for insolvency, investors have understandably jumped ship — that is until opportunistic day traders sent its stock soaring 90% on June 29. This same strategy has seen market volatility for stocks such as Hertz (NYSE: HTZ) and Chesapeake Energy (NYSE: CHK), but that’s another story.
Meanwhile, a market rocked by the Zoom (NASDAQ: ZM) privacy scandal in March to the recent collapse of Luckin Coffee (NASDAQ: LK) needs some stability. That’s why we have picked 3 top payment solution stocks to help cure the hangover left behind by Wirecard.
1. PayPal
One of the earliest players in the online payment solutions games — and an early endeavor of Tesla (NASDAQ: TSLA) CEO Elon Musk — PayPal (NASDAQ: PYPL) has been a big winner for investors in 2020, growing 52% YTD compared with the S&P 500’s (NYSEARCA: VOO) 6% drop as of June 30.
Before the likes of Shopify (NYSE: SHOP) and Amazon (NASDAQ: AMZN) began building their own payment platforms, PayPal was the go-to solution — and remains so for many. Like many, PayPal hit March lows as the coronavirus struck the market hard, but it still managed to pull together some impressive Q1 results. Year-over-year growth shot to 17% in total active accounts with the company adding a further 20 million accounts and acquiring Honey in January.
The company also boasted its largest single-day of transactions ever on May 1, as well as releasing a new QR code scanning product that allows customers to pay for products in-store without checkout. This enables smaller merchants to provide contactless payments within their stores without having to buy new equipment. This feature rolled out in 28 countries first, including the US, UK, Canada, Italy, Spain, and Germany.
An old reliable in the payment space, unless investors have missed something big in the last 2 decades, you can be safe in the knowledge that there is nothing untoward about an investment in PayPal.
2. StoneCo
There is no greater compliment I can pay to StoneCo (NASDAQ: STNE) than the fact that Berkshire Hathaway (NYSE: BRK.B) CEO Warren Buffett is a massive fan and a $336 investor. Known as the ‘Square (NYSE: SQ) of Brazil’, times have been a bit tough on the payment solutions firm in 2020 as the Brazillian economy has suffered greatly from COVID-driven economic downturn.
Shares fell with the economy in May and the company was forced to let go of 1,300 of its staff but did do a good deed by offering generous departure packages and helping to re-staff where possible. It still benefitted from strong Q1 results which saw a 33% revenue increase year-on-year as well as its dominance of 51% of all e-commerce transactions in Brazil. With the founders already having a decade of experience working within the electronic payments industry in Brazil, they know their market and its demands well.
This is one of these high risk, high reward situations as StoneCo could do well if it should solidify its standing in South America, but it now faces competition in the form of Facebook (NASDAQ: FB), Mercado Libre (NASDAQ: MELI), and PagSeguro Digital (NYSE: PAGS). StoneCo has the potential to be more volatile particularly in the current climate but still manages to perform well, and it has shown its mettle to be a great long-term stock to invest in for the future.
3. Square
In an extremely crowded space from both industry giants and exciting startups alike, Jack Dorsey-owned Square has been a revelation for investors. The Twitter (NYSE: TWTR) CEO splits his time between the social media giant and the payment solutions app, but many investors wish that he would just stick to one, believing that the companies are suffering.
However, that’s not the tale of the tape judging from Square’s 2020 so far, which has seen its stock jump more than 60% YTD. Though Q1 earnings missed analyst targets with losses per share of $0.02 on revenue of $1.38 billion but provided a lot of optimism through its Paycheck Protection Program loans to small businesses which amount to close to $1 billion.
Not only that but Square may be bringing its U.S. popularity to Europe, having recently closed the purchase of Spanish payment business Verse, giving it a foothold on the European continent and within the Euro currency. Square represents another trustworthy investment in a rapidly growing market as more and more consumers opt for physical cash alternatives.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.