BofA restarts payments coverage, backs FIS, Global Payments and Toast

Investing.com -- In a note on Thursday, Bank of America reinstated coverage of six payments and processing companies, naming FIS, Global Payments and Toast as Buys, while downgrading PayPal to Underperform.

Analyst Matthew O’Neill told investors that simpler portfolios and market share gainers lead the group. He explained that following January’s asset swap, FIS and Global Payments each serve one clear end market, and he believes investors have yet to give them credit for it.

“FIS (Buy, $42 PO) swapped Worldpay for TSYS, adding stable, recurring issuer revenue that serves many of its existing bank clients,” the analyst wrote. “GPN (Buy, $114 PO) took on Worldpay at a much lower valuation and targets ~$600M of synergies, of which we model ~85%. Both trade at ~5x forward P/E, versus historical averages of ~11x and ~8.5x, respectively, and below FISV at ~6x.”

Toast, rated a Buy with a $40 target, is described as the group’s clearest structural share gainer.

“Because TOST owns the restaurant’s data and workflows, we expect AI to strengthen its position rather than displace it,” O’Neill stated. BofA models 2027 net location additions about 10% above consensus.

Fiserv was reinstated at Underperform with a $48 target, as the last scaled processor still combining bank and merchant processing. O’Neill said its recovery depends on rebuilding banking retention while defending Clover.

Shift4 and Jack Henry were both rated Neutral.

On PayPal, moved to Underperform with a $53 target, O’Neill said: “At ~9x STM EPS the stock looks inexpensive, but we see little to slow the erosion in the near term.”

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