Much depends on where you look, of course.
December’s latest macro data shows that consumers pulled back during the holiday shopping season, and the month showed a 0.2% drop in spending vs. November. But spending via credit cards and buy now pay later conduits continued to gain ground overall, as measured in various earnings and company updates.
A slowdown may be in the offing, but growth is still in the cards, literally and figuratively.
All Pillars Gain Ground
To that end, the CE 100 Index soared 5.3% last week. All pillars were higher, and payments-related names led the pack, as the group was up 7.8%. That rally outpaced the 4.8% advance seen in the NASDAQ.
Sezzle soared 28.5%. The company said in a release last week that revenues for December were up nearly 16% year over year and 1.7% above November’s levels.
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The company also said that it achieved profitability for the second month in a row.
And in terms of credit metrics, Sezzle also said that for the fourth quarter, the provision for uncollectible accounts as a percentage of underlying merchant sales is expected to be 1.5% or less – which the firm noted is a “significant improvement” compared to 3.5% a year ago.
American Express was 13.7% higher. As noted in our coverage of the payment network’s earnings on Friday (Jan. 27th), credit continues to be a preferred payment method among younger consumers.
Billed business, a measure of card spending that includes transactions and cash volumes, was up 15% to $357 billion in the aggregate. Travel and entertainment spending was 112% of fourth-quarter 2019 levels. And as management noted on the conference call, younger generations have been enthusiastic about using their cards, as millennials and Generation Z consumers’ spending was up 30% year on year.
Affirm rounded out the top three names in the payments sub-sector with a 13.6% boost. Kayak and Affirm said this week that to offer travelers payment flexibility amid a 40% year-over-year increase in the cost of plane tickets. The company partnership lets travelers split the total cost of flights, lodging and rental cars/car sharing greater than $150 into monthly payments (Booking Holdings, which owns Kayak, saw its stock gain 5% this past week.).
Visa also pulled the pillar higher, up 3.2%. Visa reported fiscal first-quarter results that showed credit volumes, in constant dollar terms, was up 11%, to $1.5 trillion, outpacing debit, which grew 3%, to just under $1.5 trillion. New payment flow related revenues were up more than 20%. U.S. payments volume was up 9% year over year and 44% over 2019 in constant dollars in a sign of continued consumer resilience.
“Enabler” names trailed payment companies’ stock surge only slightly, with a 7.5% gain. Within this segment, excitement over artificial intelligence (AI)-driven initiatives helped push C3.ai 31% higher, as the U.S. and the European Union have announced joint efforts to use artificial intelligence to help improve agriculture and healthcare, among other sectors. “Movement” focused companies, which were up 7.3% as a group, were buoyed by Tesla’s 33% rally spurred by comments from CEO Elon Musk, who said that the company is on track to produce 2 million vehicles this year.
Banking, as the “worst” performing sector, was a bit more than 1% higher. Positive performance from the likes of J.P. Morgan Chase (up 3.8%) and Citigroup (up 1.5%) offset the week’s 5% loss in LendingClub. LendingClub, in its own report, showed that higher interest rates are cutting into investors’ demand to buy loans. Marketplace revenue was down 28% as a result. Quarterly loan originations were $2.5 billion in the latest quarter, down from $3.1 billion last year.
