May became the first negative month of 2019 for payments stocks as worries about tariffs and an economic slowdown as a result gripped the wider market.
Chicago-based Barrington Research Associates Inc. reported Monday that a 29-company group of transaction-processor stocks posted a mean return of negative 2.57% last month. Only 12 firms posted positive returns.
Still, the payments sector once again beat the major market indexes. The Nasdaq Composite Index tumbled 8.07% last month, the Dow Jones Industrial Average fell 6.69%, and the Standard & Poor’s 500 Index wasn’t far behind with a 6.58% loss.
Barrington Research managing director Gary Prestopino was sanguine about the payments performance. “You would naturally expect not every month is going to be up,” Prestopino tells Digital Transactions News.
May’s pullback for payments firms was likely the result of broader concerns than problems in the payments business. U.S. tariffs on foreign goods imposed as a result of President Donald Trump’s escalating trade war with China and now possibly Mexico, will hurt other sectors more than payments, according to Prestopino. “It’s a very good, strong, resilient recurring-revenue group of companies,” he says. “The majority of these companies are not going to get impacted by tariffs.”
The three worst-hit payment stocks, however, suffered as a result of specific developments, not just the general market funk. Wire-transfer provider MoneyGram International Inc.’s share price dropped 58% over the month after the company reported first-quarter financial results well short of expectations, according to Prestopino. Prepaid card and banking services provider Green Dot Corp., down 27.2%, announced plans for investing $60 million in new initiatives, which some investors didn’t like. And shares of ATM network owner Cardtronics plc, off 15.6%, slipped in the wake of a negative report by a short seller (an investor hoping to make money when the price of a stock drops), he says.
The top gainer, up 22.5%, was the small processor Payment Data Systems Inc., which reported quarterly results that surpassed its earlier guidance. Next was Total System Services Inc. (TSYS), the big processor that on May 28 announced a deal to be acquired by Global Payments Inc. for $21.5 billion. TSYS ended the month up 20.8%.