“Few names in our coverage carry as much baggage as we enter the brand new yr,” Bauch wrote of PayPal as he lowered his rating on the stock to underperform from neutral.

Bauch had made the reverse change on that name last summer, reasoning that activists at Elliott Management would help drive margin improvement at PayPal that might be well received by Wall Street.

“We proceed to imagine that pulling back significantly on investment will
erode PYPL’s [long-term] growth prospects,” he said.

PayPal shares declined 3.6% in Wednesday’s session.

Bauch is more upbeat about Lightspeed, upgrading shares of the payment technology company to outperform from neutral in his latest note. He acknowledged that some investors might see the move as a “leap of religion,” but in his view, the “once-beloved payments story can find latest life in 2023.”

Despite Bauch’s caution concerning the upcoming quarterly report he expects that “management has enough talking points at its disposal to construct optimism for the years ahead.”

He also moved to a neutral stance on Marqeta, whereas he previously rated the stock at underperform.

“Importantly, we see an inexpensive possibility that two of the most important overhangs within the story are alleviated within the near-term,” Bauch wrote, referring to the renegotiation of the card-issuing company’s operating agreement with Block Inc. and the appointment of the corporate’s next chief executive.

Bauch’s top picks within the sector are Flywire Corp.
FLYW,
+0.12%,
Paymentus Holdings Inc.
PAY,
-1.52%,
Shopify Inc.
SHOP,
-2.03%,
and Toast Inc.
TOST,
+0.64%,
all of which he rates at chubby.