On Monday, Keefe, Bruyette & Woods (KBW) expressed optimism about several payment processing companies ahead of their fourth-quarter earnings reports, anticipating that the 2025 outlooks provided will be a primary factor in stock movements.
According to KBW, despite potential headwinds from foreign exchange (FX) and fuel prices, the core trends in consumer spending are showing improvement since the third quarter, which could outweigh these negative factors.
KBW named Adyen (AS:ADYEN), PayPal (NASDAQ:PYPL), Mastercard (NYSE:NYSE:MA), and Fidelity National Information Services (NASDAQ:III) (NYSE:FIS) as the companies it views most favorably going into the earnings print. These companies are expected to meet or exceed the consensus expectations for 2025, with PayPal and Adyen particularly well-positioned to provide positive outlooks. PayPal is anticipated to potentially surpass consensus gross profit growth expectations for 2025, while Adyen is expected to show revenue acceleration and margin upside.
The firm noted that PayPal's gross profit growth could be stable or even accelerate in 2025, supported by various factors including changes in Braintree pricing, new pricing for buy now, pay later (BNPL) services, and merchant conversion to modern payment experiences. Additionally, PayPal may benefit from partnerships such as those with Synchrony Financial (NYSE:SYF) to mitigate late fees.
Adyen's fourth-quarter revenue growth is projected to remain consistent with the previous quarter, but EBITDA margins are likely to improve both sequentially and year-over-year. KBW anticipates that management will confirm expectations for revenue growth acceleration into the mid-20s percentage range for 2025. The positive outlook is supported by new client wins throughout 2024, which provide visibility into the company's revenue acceleration potential.
On the other hand, KBW also identified companies that may face downside risks, largely due to FX and fuel prices, and specific factors such as tax increases for Mastercard and divestitures for Global Payments Inc. (NYSE:NYSE:GPN). Toast Inc. (NYSE:NYSE:TOST) was mentioned as potentially unpredictable, with the possibility of disappointing EBITDA margins and gross payment volume per location, despite lowered consensus expectations following management's commentary.
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