Bank of America favors card organizations as the safest investment targets, bullish on Visa and MasterCard

Investing.com - Bank of America has resumed coverage of several payment companies, stating that despite recent market sentiment pressure, stable transaction growth and widespread digital payments continue to support the sector.

The bank maintains a generally constructive outlook for the sector, citing expansion in digital commerce, improved cross-border spending, and ongoing de-cashization trends.

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Among the companies it covers, Bank of America considers card networks Visa and Mastercard to have the strongest risk-adjusted investment opportunities, both rated as Buy.

The bank states that as electronic payments increase their share globally, card networks benefit from sustained profitability, solid fee structures, and strong cash flows. It adds that this model is largely unaffected by potential disruptions from artificial intelligence, and recent stock price weakness caused by regulatory and macroeconomic concerns presents an entry opportunity.

In the digital wallet space, Bank of America rates Block Inc as a Buy with a target price of $88, and PayPal Holdings as Neutral with a target price of $48.

The bank notes that after Block announced a 40% layoff related to its AI initiatives, it entered 2026 with a lower cost base, while its Square and Cash App businesses are showing improving trends.

In contrast, PayPal faces what Bank of America calls a “fundamental reset,” due to slowing brand checkout growth. Its large scale and strong free cash flow provide support, but the bank states that future growth visibility remains limited. News reports also suggest that PayPal or some of its assets could attract acquisition interest from payment competitor Stripe.

Bank of America has also resumed coverage of buy now, pay later providers Affirm Holdings and Klarna, both rated as Buy.

The bank states that Affirm benefits from steady growth in gross merchandise volume, strict underwriting standards, and broader distribution channels, including partnerships with Amazon and Shopify. Klarna is gaining momentum in the U.S. market, with faster gross profit growth, although recent guidance and upcoming lock-up expirations could increase volatility.

Bank of America indicates that as online commerce adoption rises, buy now, pay later services remain well-positioned to capture additional market share.

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