By Senad Karaahmetovic
KeyBanc analysts have weighed in on fintech stocks and made a number of rating changes as they argue that the sector is being reshaped by Embedded Finance.
The new environment, which is based on the model where “FinTech solutions are deeply integrated within cloud-based software platforms utilized by merchants, businesses, consumers and issuers, effectively dispersing the value chain toward the edge,” favors companies like Block (NYSE:SQ), they said.
KeyBanc is bullish on Block amid “rising Cash App monetization fueled by Direct Deposit/Card attach and Square distribution expansion with outbound efforts.” The analysts also upgraded Visa (NYSE:V) and Mastercard (NYSE:MA) shares to Overweight from Sector Weight, both seen as Key Ideas in the fintech sector, alongside Block.
“[We] upgrade [V and MA] to OW as our prior travel-related dislocation concerns have faded and new flows (e.g., P2P, B2B, etc.) beyond consumer card are improving the diversification and growth durability,” they wrote in a client note.
On the other hand, KeyBanc downgraded PayPal (NASDAQ:PYPL) to Sector Weight from Overweight amid “fundamental uncertainty.”
“Prospects that branded share gains could be constrained provided momentum across other wallets such as Apple Pay (KBCM forecasts >$0.5T online TPV),” the analysts added.