Among the tech sector's top performers year to date are the Western Union Company (WU), Fiserv (FISV) and PayPal (PYPL), which all offer payments-related services, according to S&P Capital IQ tech sector analyst Scott Kessler. Shares of Western Union are up 9% so far this year, Fiserv is up 6% and PayPal gained 8%. That compares to the S&P 500's 2% loss and a 3% drop in the index's tech sector.
None of the three is exactly setting the world on fire, but all three have performed better than expected despite facing heightened competition from more famous tech competitors. Apple (AAPL), Alphabet's (GOOGL) Google and Samsung, among others, all started heavily-hyped payments services that some thought would "kill" the older players. But it has not come to pass, at least not yet.
"These aren't the most exciting businesses out there," Kessler says. "But these kinds of businesses are a lot more stable than areas of technology that have gotten all the negative attention year to date, like cloud services."
Lately, none of the three has posted stellar quarterly results, but all avoided disaster in an earnings season that has punished companies for disappointing.
Western Union, founded in 1851, is a top money-transfer service. The company's fourth-quarter revenue, down 2% to $1.38 billion, and profits per share of 42 cents, down 1%, just about met analyst expectations, but the real "excitement" was the announcement of a 3% hike in the company's dividend.
Fiserv, a leading payments processor, saw its revenue increase 4% in the fourth quarter to $1.37 billion, with adjusted earnings per share increasing 12% to $1. Again, both figures were about what analysts expected.
PayPal, which spun off from eBay (EBAY) last year as a leading online payments service, posted fourth-quarter sales of $2.56 billion, up 17% and just slightly better than analysts expected. Adjusted EPS of 36 cents beat estimates by 2 cents.
The three companies are far removed from last year's top performers, led by well-known video streaming service Netflix (NFLX) and ecommerce giant Amazon.com (AMZN). But those two past winners have faltered dramatically in 2016. Netflix, which gained 134% last year, is down 16% so far in 2016. Amazon, up 118% in 2015, has lost 17%.
The worst-performing stocks in the S&P tech sector so far in 2016 are Alliance Data Systems (ADS), Activision Blizzard (ATVI) and Western Digital (WDC), according to Kessler. ADS and Activision have each shed 21% and Western Digital is off 17%.
Financial marketing data specialist ADS missed analyst estimates for its fourth-quarter results. Video game producer Activision also posted weaker-than-expected fourth-quarter results and failed to impress with a $6 billion deal to buy Candy Crush maker King Digital (KING). Hard drive maker Western Digital is suffering amid concerns about its $19 billion acquisition of Sandisk (SNDK) and as PC sales have proven much weaker than expected this year.
By: Aaron Pressman.
Review: Emerging Market Formulations &
Research Unit, Flagship Records.
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