KeyBanc Upgrades Visa And Downgrades PayPal, Names Top Fintech Stock Picks For 2023

Fintech investors had a brutal year in 2022 as rising interest rates and crypto winter weighed on growth rates and investor sentiment. On Monday, one Wall Street analyst adjusted his coverage of several top fintech industry stocks and named his top three fintech stock picks for 2023.

The Analyst: KeyBanc analyst Josh Beck issued the following ratings changes for fintech stocks under his coverage:

• Fidelity National Information Servcs Inc (NYSE: FIS) downgraded from Overweight to Sector Weight, price target maintained at $75.
• PayPal Holdings Inc (NASDAQ: PYPL) downgraded from Overweight to Sector Weight, price target reduced from $100 to $80.
• i3 Verticals Inc (NASDAQ: IIIV) upgraded from Sector Weight to Overweight, price target raised from $22 to $30.
• Mastercard Inc (NYSE: MA) upgraded from Sector Weight to Overweight, price target raised from $305 to $425.
• Visa Inc (NYSE: V) upgraded from Sector Weight to Overweight, price target raised from $187 to $250.

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In addition to the ratings changes, Beck also cut his price targets for Overweight-rated Robinhood Markets Inc (NASDAQ: HOOD) from $13 to $12, Marqeta Inc (NASDAQ: MQ) from $10 to $9, Nu Holdings Ltd (NASDAQ: NU) from $6 to $5 and Global Payments Inc (NYSE: GPN) from $140 to $115.

The Thesis: Beck said Monday that his top fintech ideas for 2023 include companies that have underappreciated growth opportunities and profitable business models. He said Block Inc (NYSE: SQ) is a top pick in 2023 because of its Cash App monetization opportunities. In addition, he said credit card giants Visa and Mastercard are top stock picks because travel headwinds have faded and peer-to-peer and business-to-business payments have created growth and diversification opportunities beyond their consumer credit card businesses.

"Embedded Finance is re-shaping the FinTech & Enabling Software value chain, prompting a thesis refresh that favors key ideas such as SQ on underappreciated growth durability and profitability upside (KBCM above Street on EBITDA), while we see new payment flows (>50% of our multi-year growth) extending the growth runway at V and MA," Beck said.

Related Link: Why The IPO Window For Fintech Is 'Essentially Closed' In 2022

Benzinga's Take: Investors were bombarded with dozens of exciting fintech IPOs in recent years, only to see most of those stocks get crushed right out of the gates as rising interest rates triggered a sell-off in risk assets. Many of these fintech startups may not survive the recent downturn, but there's no question the market leaders have long and massive growth opportunities as the next generation of financial services emerges in the next decade.