We recently compiled a list of 10 Best Digital Payments Stocks To Buy Now. In this article, we will look at where American Express Company (NYSE:AXP) ranks among the best digital payments stocks to buy now.
Digital Payments Industry: An Analysis
It was the global pandemic that catalyzed the contactless ways of payment around the world. As physical stores shut down, digital payment methods became the norm with shoppers looking for a less personal and more digital interaction. According to a poll by the digital payment leader Mastercard, more than half of Americans opted for some form of contactless payment such as tap-to-go credit cards and mobile wallets amid COVID. The trend has continued and is here to stay since more than two in every three in-person transactions globally on Mastercard’s network were reported to be contactless in 2023.
McKinsey’s 2023 Digital Payments Consumer Survey reveals that online purchasing took the lead among all other kinds of digital payments among consumers. With the return of in-person shopping, using a device to pay at retail places by scanning a bar code with it or tapping it on a point-of-sale device, also known as in-store digital payments, has grown. Simultaneously, the in-app digital payments and peer-to-peer payments have risen since 2021. This reflects the already mainstream consumer digital payments which are and will continue to evolve.
The other market which tends to be highly addressable and promising is the B2B digital payments market with businesses looking for more ways to drive efficiency and engage in cross-border business transactions. This market was valued at $1.69 trillion in 2023 and is expected to grow at a compound annual growth rate of 9.38% from 2024 to 2033, as reported by Brainy Insights. Global Payments CEO, Cameron Bready, mentioned B2B payments as the next frontier for payments, with significant growth in the digitization of B2B payments. In an interview with CNBC, he emphasized this big opportunity by predicting the B2B market to be 3 to 4 times the size of the consumer market. According to him, this market remains highly fragmented and under-penetrated.
Our Methodology:
We first used a stock screener and mobile payments ETFs to make an extended list of the relevant companies with the highest market caps. Moving on, we shortlisted the top 10 stocks from our list which had the highest number of hedge fund holders. The 10 best digital payments stocks to buy now have been arranged in ascending order of their hedge fund holders as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 68
American Express Company (NYSE:AXP) serves as a globally integrated payments company. The company started off as a freight forwarding company in 1850. It operates through multiple segments, including U.S. Consumer Services, Commercial Services, International Card Services, and Global Merchant and Network Services. The firm’s integrated payments platform comprises card-issuing, merchant-acquiring, and card network businesses.
American Express has efficiently positioned itself as the world’s largest integrated payments platform. The firm’s broad and diverse customer base including consumers, small businesses, mid-sized companies, and large corporations spans the globe. Its world-class service has also earned it a place among the most valuable brands in the world. Thus, the brand name remains strong and intact.
The quality of AXP’s loyal premium customer base with high spending and excellent credit profiles, a well-managed expense base, and the rapidly expanding scale of the business have brought momentum to the firm’s core business. The growing scalability of American Express can also be witnessed from the 24 consecutive quarters of double-digit growth in card fee revenue and strong new account acquisitions. Revenues have expanded by almost 50% as compared to 2021’s year-end while card member spending has risen by nearly 40%.
The leadership position in the digital payments landscape, brand name, and strong growth trajectory rank the firm among the 10 best digital payment stocks to buy now. The number of hedge funds owning stakes in American Express Company (NYSE:AXP) was 68 in Q2 2024. The consolidated value of these stakes is nearly $38.48 billion. Warren Buffett’s Berkshire Hathaway was the company’s leading stakeholder in Q2
Overall AXP ranks 5th on our list of the best digital payments stocks to buy. While we acknowledge the potential of AXP as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than AXP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published on Insider Monkey.