PTC Announces CFO Transition

By Emily Bary

J.P. Morgan recommends shares of Visa and Toast, which have both struggled for momentum in 2025 despite having quality businesses

J.P. Morgan says Toast shares now look appealing.

It's been the worst year for payments stocks in 15 years if you exclude the pandemic, according to J.P. Morgan analysts. And that could mean opportunity for investors who know where to look.

First, it's worth unpacking why payment-technology and financial-technology stocks have struggled this year. Investors have worried about slowing growth and potential commoditization, and they've wondered whether new offerings around lending and other areas will pay off.

So how should investors respond heading into 2026? J.P. Morgan's Tien-tsin Huang first recommends a classic play. Shares of Visa (V) are "trading at a 10-year valuation floor relative to S&P 500," despite boasting some standout metrics not just within the payments sector, but within the index as a whole. Only two other S&P 500 SPX components offer both double-digit revenue growth and margins north of 50%, Huang noted.

Visa's stock has underperformed the broader market this year, rising 3% as the S&P 500 has gained 17%. But Huang sees intriguing opportunity around the company's work to "tokenize" payment credentials, which is the process of converting things like card numbers into more secure forms that will work for new types of online commerce. They could prove "foundational to agentic commerce," Huang wrote, referring to the idea that artificial-intelligence agents could help with purchases.

Read: Visa, Mastercard reach new settlement with merchants. Will it shake up credit-card rewards?

He also recommends shares of Toast (TOST), which he just upgraded to overweight. "We've been eagerly waiting for the right time to take a seat at the Toast table, and with shares down 6% [year to date] despite estimates up 27%," the time is now, according to Huang.

Toast makes payment-processing and other software for the restaurant industry. The company is "unburdened by legacy distribution" and technology, according to Huang, plus its brand has a strong reputation.

His other bullish picks are Corpay (CPAY), which makes expense offerings and cracks Huang's list for being a value play, and Block (XYZ), the Square parent company whose stock he thinks screens well through the lens of growth at a reasonable price.

More from MarketWatch: Block's stock has suffered in a 'dismal' fintech market. But these new forecasts are drawing cheers.

Meanwhile, Huang downgraded shares of PayPal Holdings (PYPL) and Fiserv (FISV) to neutral, writing that it's "too late to sell and too early to buy" them. PayPal shares have dropped 28% this year while Fiserv shares have lost 68%.

"While we still appreciate the ingredients PayPal is cooking with, it will take time for the bread to rise," Huang wrote. And Fiserv is in the midst of a major reset, which is likely to mean an "investment/turnaround year featuring low-single total company revenue growth and down margins."

See also: Fiserv execs bet $1.5 million on a turnaround

-Emily Bary

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

By Nate Wolf

With payments stocks on track for their worst non-pandemic year since the Great Recession, investors should fall back on names with strong fundamentals in 2026, J.P. Morgan says.

Analysts at the investment bank moved to the sidelines on PayPal Holdings and Fiserv, downgrading both to Neutral from Overweight in a research note Thursday. Visa and Toast, on the other hand, are solid bets, the firm argued.

"For 2026, we're going back to basics to prefer names with pricing power, strong incremental margins, and front book velocity," wrote the analyst team led by Tien-tsin Huang. "We choose to steer clear of turnarounds."

Let's start with the laggards. J.P. Morgan downgraded PayPal a day after the company's finance and operations chief warned of sluggish growth in its branded checkout business. PayPal has long-term potential, Huang and his team said, pointing out investments in buy now, pay later and artificial-intelligence-driven "agentic commerce." But the company's breakout moment might come later than expected.

"While we still appreciate the ingredients PayPal is cooking with, it will take time for the bread to rise," the analysts wrote.

J.P. Morgan trimmed its financial estimates for PayPal through 2027 and lowered its price target for the stock to $70 from $85. Shares were down narrowly to $61.20 on Thursday, having fallen 28% this year as of Wednesday's close.

Fiserv, which has seen its shares plummet 67% in 2025, is a similar story. After over-investing in short-term growth initiatives, much-needed investments in service and technology will weigh on revenue and margins in 2026, J.P. Morgan said.

In Fiserv's third-quarter earnings print in late October, the company slashed 2025 guidance to an extent that left many shareholders reevaluating their investments. The reset led to an "emotional capitulation that we think will take time to heal," the J.P. Morgan analysts wrote.

Prior to the downgrade, the bank nearly halved its price target for Fiserv stock to $85 from $155 in October. Shares slipped 0.6% to $66.55 on Thursday.

On the bright side, investors looking to buy low on payments names have some options. J.P. Morgan upgraded point-of-sale provider Toast to Overweight from Neutral and set a $43 price target in Thursday's research note.

Investors may know Toast as the checkout platform at their local coffee shop or sandwich joint, and that is because it has built up a "unique brand affinity among restaurants," the analysts said. J.P. Morgan sees Toast maintaining some of the best growth in the industry while keeping expenses relatively low.

Toast stock has struggled in 2025, but rose 1.7% to $35.79 on Thursday, bringing shares close to flat for the year.

Visa, meanwhile, is J.P. Morgan's top pick in the payments space. Unlike many other names in the industry, the stock is up narrowly in 2025 along with Mastercard, the other half of the credit card duopoly.

The company is moving into blockchain-powered finance like stablecoins and tokenization, giving it exposure to agentic commerce, J.P. Morgan said. That innovation adds upside to a stock that is trading at a low long-term valuation relative to the S&P 500.

Visa stock gained 0.5% on Thursday, while Mastercard was down 0.2%.

Write to Nate Wolf at nate.wolf@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.