Wall Street firm Morgan Stanley is getting more bullish on the payments and processing markets, upgrading its investment rating to be attractive, with growth expected in the quarters to come. According to a report in MarketWatch, Morgan Stanley cited the resiliency of consumer spending, market share gains for electronic payments and the pricing power of these companies for the increased bullishness.
“These are some of the best businesses there are,” said James Faucette, executive director at Morgan Stanley, who wrote of payments companies in a research report. He pointed to Visa and Mastercard as two companies that can withstand any negative economic developments. He said Wall Street is "underestimating the secular push from digitization” and strong consumer spending.
He noted in the research report that consumers are moving toward digital payments at an increasing rate and that could boost the roll payment companies play. That's particularly true when new options come to market that let businesses transact with other businesses electronically. What's more, Faucette said the payments industry has benefited from good pricing leverage and that should continue in the future.
“Pricing competition has become less important in payments and, instead, merchant acquirers, in addition to networks, seem to have gained pricing power,” he wrote, according to MarketWatch.
Thoough Morgan Stanley is expressing optimism about the payments and processing sectors, it's getting bearish on the tech sector, with the firm downgrading it to underweight over concerns about tariffs and valuations that are high.
With President Donald Trump ratcheting up the trade tensions with China, thanks to his billions of dollars of tariffs on imported goods from the country, worries are abounding that tech companies will suffer. At the same time, the valuations of tech stocks have continued to soar all year, despite some controversies including Facebook's data scandal with Cambridge Analytica, the now defunct political consulting firm.