The financial technology sector has seen a slew of positive notes from Wall Street analysts this week as earnings season kicks off.
Once known for poor performance from high-profile initial public offerings at LendingClub Corp. and On Deck Capital Inc., payments companies like Jack Dorsey’s Square Inc. and PayPal Holdings Inc. are attracting support for the industry.
“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,” Paul Condra, an analyst at Credit Suisse, said in a note. “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.”
Separately, analysts led by James Faucette at Morgan Stanley upgraded the payments space as a whole, saying it’s underappreciated and has “potential for accelerating earnings growth, expansion to business to business payments, and enhanced M&A potential.”
Earlier this week, Wolfe Research’s Darrin Peller wrote that fintech companies will continue to gain customers as banks cede territory.
“The battle for direct access to the consumer has been won by technology as fintech innovators further entrench themselves between consumers and banks,” Peller said. “This victory will further materialize as banks cede turf by partnering with and outsourcing to fintech companies.”
Investors will get another look at the sector’s financial condition in the coming weeks as San Jose, California-based PayPal reports earnings on July 25 and San Francisco-based Square on Aug. 1.
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