How to play payments stocks after essentially their worst run in 15 years

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

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12-04-25 1421ET