Riding the wave of a roaring stock market, the financial services sector shines bright in 2024. After enduring the turbulent times brought on by the pandemic and interest rate fluctuations, the sector is now poised for a significant upswing. This resurgence comes on the heels of the Federal Reserve’s recalibration of its monetary policy, reinforcing robust asset prices, stable housing markets, and an increasingly optimistic consumer sentiment. Against this backdrop, financial services stocks are set to deliver compelling returns. Let’s zero in on three stellar options that merit your attention.
Visa (V)
When the dust settled on the pandemic, doubts loomed over credit card giants like Visa (NYSE:V). Travel restrictions had dealt a blow to its most lucrative cross-border transactions. The rise of FinTech firms, coupled with the crypto and blockchain craze, fueled speculation of heightened competition for credit card networks. Fast forward to present day – Visa is thriving, processing more transactions than ever. The FinTech challengers that once threatened its dominance have mostly faded, finding sustained competition with Visa and Mastercard (NYSE:MA) an arduous task. Establishing a resilient global payment network is no mean feat. Despite the renewed interest in cryptocurrencies, the impact of crypto payments on commerce remains limited. With the global economy on an upswing and a gradual shift from cash to plastic in developing nations, Visa stands tall to capitalize on the upward trajectory in transaction volumes and profitability, propelling V stock to new heights.
Broadridge Financial Services (BR)
Spawned from Automatic Data Processing (NASDAQ:ADP) in 2007, Broadridge Financial Services (NYSE:BR) specializes in proxy services, commanding an enviable 80% market share in shareholder communications and voting. Beyond its core proxy services, Broadridge is fortifying its revenue streams by offering software and tools tailored for brokerage and wealth management back-office functions. While not the flashiest of firms, Broadridge has exhibited a steadfast trajectory of earnings and dividend growth since its public debut. Projections indicate a solid 10% annualized EPS growth in the foreseeable future. With the markets buzzing and financial activities gaining momentum, Broadridge is poised for sustained growth in the days ahead.
PayPal (PYPL)
In stark contrast to Visa’s fortunes, PayPal (NASDAQ:PYPL) witnessed a meteoric rise in 2020 and 2021, basking in the e-commerce boom and the surge in online services adoption. However, the euphoria fizzled out when the temporary growth catalyst ebbed, triggering widespread sell-offs across the payment services landscape. PayPal shares tanked, shedding nearly 80% from their peak in 2021. While the lofty valuation of $300 per share in 2021 was unsustainable, the pendulum has swung too far in the opposite direction. At 13 times forward earnings, PYPL stock now appears undervalued. Flush with cash, PayPal can leverage it for share buybacks or strategic investments in ancillary services. Despite the bearish sentiment, PayPal continues to exhibit robust earnings growth and revenue uptrend, with analysts predicting further expansion in the foreseeable future. For investors eyeing a bargain in the financial services universe, PayPal presents a compelling opportunity to profit handsomely once market sentiment turns in its favor.
Disclaimer: The author, Ian Bezek, holds a long position in BR and V stock. The opinions expressed in this article are solely those of the author, in agreement with the InvestorPlace.com Publishing Guidelines.
