Use Trump-Related Weakness to Buy Payment Stocks - Jefferies (V) (MA) (PYPL)

Jefferies analyst Jason Kupferberg sees a buying opportunity in payment processors Visa (NYSE: V), MasterCard (NYSE: MA), PayPal (NASDAQ: PYPL), Global Payments (NYSE: GPN), and Vantiv (NYSE: VNTV) amid underperformance since the election of Donald Trump. Kupferberg views the 5-10% correction in core Payments names as not warranted fundamentally.

The analyst believes the downside is largely because of investor rotation into core Financials, which are expected to experience a significant rate and regulatory tailwind under a Trump Administration, rather than fundamental concerns regarding the payments names.

They generally envision Trump as a tailwind for payment stocks.

"If Trump's general plans for de-regulating the financial services industry ends up including a repeal of the Durbin Amendment and a less-powerful CFPB, this should generally be a tailwind for the Payments industry, though impacts to PYPL/SQ/merchant acquirers may be less clear," the analsyt commented. "That said, we wouldn't necessarily expect the networks/issuers to significantly raise debit interchange rates even in the event the Durbin Amendment is repealed, as long as the reopened Brooklyn litigation is continuing. In addition, to the extent policies of the Trump Administration fuel domestic economic growth (ie, possible tax cuts), that should be positive for US consumer payment volumes, though exposure to emerging markets and a stronger USD could be viewed as incremental headwinds."

The firm's favorite payment stocks remain Paypal and Visa.

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