Shares of transaction-processing companies lost ground in November for the second month in a row, but the decline wasn’t nearly as great as October’s 10% plunge, according to new data from Barrington Research Associates Inc.
The Chicago-based investment firm says share prices of a group of 26 publicly traded transaction processors posted a negative 0.29% mean return last month. Processors trailed the three leading market indexes—the Standard & Poor’s 500 Index with a mean return of 1.78%, the Dow Jones Industrial Average, which rose 1.68%, and the Nasdaq Composite Index, up 0.34% for the month.
Processor shares slipped despite a strong third quarter in which 20 out of the 25 sector companies that reported financial results in October and November beat analysts’ earnings-per-share expectations and only four missed them, according to Gary Prestopino, a managing director at Barrington Research.
“We’re in a very choppy market environment,” Prestopino tells Digital Transactions News. In part, the processor stocks are getting pulled down by bigger forces, including worries about tariffs and a trade war with China, rather than by issues specific to the payments industry, according to Prestopino.
Investors also may have taken some profits, especially in October—the first month in 2018 in which processor stocks declined as a group. “One could say the companies’ prices reflected an anticipation of good [earnings]; when those numbers came out you had people ‘selling the good news,’” says Prestopino. He adds that the industry saw “some stabilization” in November.
Leading the pack last month were ATM network operator Cardtronics plc with a 19% gain; ACI Worldwide Inc., up 15%; Qiwi plc, up 14%, and Green Dot Corp., up 10%. The trailers were MoneyGram International Inc., off 49%; Net 1 UEPS Technologies Inc., down 19%; Bottomline Technologies Inc., off 17%, and USA Technologies Inc., down 14%.
On Tuesday, however, processor stocks swooned with a tanking general market. Highly profitable stalwarts such as Visa Inc. and Mastercard Inc. both ended the regular trading day down 4% from Monday’s close. Shares of merchant processor Square Inc. plunged nearly 12%. The Dow dropped nearly 800 points, or 3%, and the S&P and Nasdaq fell 3% and 4%, respectively.
The cause, according to reports on the financial wires, was concern that the China trade issues won’t be resolved soon, and narrowing spreads between yields on long and short-term Treasury securities, a sign that investors are worried about a downturn. But Prestopino says “we haven’t seen any tangible evidence of that.”