J.P. Morgan Recommends Visa and Toast Amid 15-Year Payments Sector Slump

This analysis is based on the MarketWatch report [2] and J.P. Morgan’s December 4, 2025, recommendations. The payments/fintech sector has experienced its worst year in 15 years (excluding the COVID-19 shock), impacted by slower growth and fears of commoditization and uncertain ROI [1]. In response, J.P. Morgan called for a 2026 sector reset, shifting investor focus back to basics by favoring high-quality companies with pricing power and strong margins.

Visa (V) was named the bank’s top overall pick, trading near a 10-year valuation floor relative to the S&P 500, which could attract value investors. Visa’s potential upside includes tokenization and AI-driven agentic commerce opportunities. Toast (TOST), a restaurant payments and management software provider, received an upgrade to Overweight despite its 6% year-to-date decline, due to strong 27% growth estimates. Conversely, Fiserv (FISV) and PayPal (PYPL) were downgraded to Neutral, with J.P. Morgan stating it is “too late to sell and too early to buy” [1].

Sector context shows mixed performance on December 4, 2025: the Financial Services sector was up 0.406%, while the S&P 500 declined 0.12% and the NASDAQ rose 0.01% [1]. J.P. Morgan identified AI-driven agentic commerce as a long-term catalyst for card networks like Visa and Mastercard (MA) [1].

1. Sector Reset Theme
   : J.P. Morgan’s call for a 2026 sector reset marks a shift from pessimism to cautious optimism, emphasizing fundamentals over speculative growth.
2. Valuation Opportunity
   : Visa’s current valuation near a 10-year floor relative to the S&P 500 presents a potential value investing opportunity.
3. AI as a Catalyst
   : AI-driven agentic commerce is identified as a key long-term growth driver for card networks investing in AI and tokenization.
4. Selective Recovery
   : The recommendations highlight a selective recovery, where high-quality companies with pricing power and margin strength are expected to outperform.

• Tokenization and AI
  : Visa’s progress in leveraging tokenization for AI-enabled payments could drive long-term growth.
• Valuation Reversal
  : Visa’s 10-year valuation floor suggests potential for price appreciation as sector sentiment improves.
• Toast’s Growth
  : Toast’s strong estimate growth despite market headwinds indicates underlying business strength, particularly in the restaurant payments segment.
• Sector Sentiment Shift
  : The 2026 reset call could reverse negative investor sentiment for high-quality payments stocks.

• Sector Headwinds
  : Slower revenue growth (expected to decrease from ~9% to 4% annually) and ongoing fears of commoditization [3].
• Regulatory Risks
  : Potential changes to interchange fees or other payment industry regulations could impact profitability.
• Competition
  : Rising competition from digital wallets and alternative payment methods could pressure margins.
• Macroeconomic Conditions
  : Interest rate changes and consumer spending trends may affect payment volumes.

As of December 4, 2025, J.P. Morgan recommends Visa (V) and Toast (TOST) and downgrades Fiserv (FISV) and PayPal (PYPL). The payments sector has faced significant headwinds in 2025, its worst year in 15 years (excluding COVID). The report suggests a 2026 reset, favoring companies with pricing power, strong incremental margins, and solid front-book momentum. Visa trades near a 10-year valuation floor, while Toast has 27% estimated growth despite a 6% YTD decline. AI-driven agentic commerce is identified as a long-term catalyst for card networks. Decision-makers should monitor tokenization adoption, Toast’s growth execution, sector sentiment, and macroeconomic conditions.