As we enter a new year, the opportunity set in the stock market remains compelling. The US economy has proven more resilient than many expected, the artificial intelligence boom continues to gain momentum, and the rally in equities is broadening beyond the narrow leadership of the Magnificent Seven. Together, these dynamics are creating fertile ground for stock selection as we look ahead to 2026.One tool that has consistently stood out in this environment is the Zacks Rank. It remains one of the most effect ...

Market Overview - The market rebound that began in April continued into the third quarter of 2025, with growth and momentum stocks delivering double-digit returns [1] - Small and micro-cap value stocks achieved their best quarterly returns since Q4 2023 [1] Deep Value Strategy Performance - The Deep Value strategy appreciated by +26.50% in Q3 2025, outperforming the S&P 1500 Value Index (+6.29%) and the S&P 600 Value Index (+11.71%) [1] - Year-to-date, the strategy's net returns are +9.20%, compared to +9.28% for the S&P 1500 Value Index and +3.17% for the S&P 600 Value Index [1] Company Highlight: Bread Financial Holdings, Inc. (NYSE:BFH) - Bread Financial Holdings, Inc. is a financial services company offering tech-forward payment and lending solutions, with a one-month return of 13.24% and a 52-week gain of 13.94% [2] - As of December 04, 2025, Bread Financial's stock closed at $72.00 per share, with a market capitalization of $3.29 billion [2] Performance and Transformation of Bread Financial Holdings, Inc. - Bread Financial was the only negative holding during the quarter, with a market share price down 2% [3] - The company has undergone a multi-year transformation to streamline its business model, enhance underwriting processes, and expand brand partnerships [3] - Since the beginning of the transformation in early 2020, capital ratios improved by more than 3x, debt was reduced by $2 billion, and direct-to-consumer deposits increased by over $6 billion [3] - Management has increased credit reserves to 13%, with delinquency rates at half of reserve levels, indicating potential for significant reserve release in the coming years [3] - The company aims for normalized ROTCE in the mid-20% range and normalized earnings above $15 per share, with shares trading at more than 25% normalized earnings yield [3]

Buy now, pay later (BNPL) is likely the easiest borrowing experience most consumers will ever have. With an option at checkout to split your purchase into a down payment and subsequent installment payments every two weeks or so, you get the merch and an easy-pay plan all at once. It's a pitch that consumers are embracing. Adobe for Business reports that more than $10 billion in holiday purchases will be made with BNPL, up 9% from last year. Half of holiday shoppers said they'll use BNPL this year, accord ...

Core Insights - PayPal's stock (PYPL) has experienced negative returns in 2025 but has rebounded nearly 25% from a low of $55.85 in April 2025, driven by better-than-expected results and a focus on innovation-driven growth [1][2] - The company reported strong Q3 2025 results, with net revenue increasing by 7% to $8.4 billion and total payment volume rising by 8% to $458.1 billion, indicating positive momentum [5][6] - PayPal's first-ever dividend signals a commitment to shareholder value creation [2] Financial Performance - For Q3 2025, PayPal's total payment volumes reached $458.1 billion, with active accounts totaling 438 million [3] - The company reported operating cash flow of $2 billion and free cash flow of $1.7 billion for Q2, alongside a cash buffer of $14.4 billion, providing financial flexibility for growth investments [6] - Notable growth areas include Buy Now, Pay Later (BNPL), with an expected total payment volume of $40 billion for 2025, and Venmo, projected to generate $1.7 billion in revenue for the year [5] Strategic Initiatives - PayPal is focusing on long-term growth through partnerships with Google, OpenAI, and Perplexity to enhance its agentic AI capabilities [7] - The collaboration with OpenAI aims to facilitate instant checkout and agentic commerce within ChatGPT, which has over 700 million weekly users, presenting significant growth potential [8] - The PayPal World transaction initiative, currently in the pilot stage, is part of the company's strategy to expand its global payment partnerships and enhance fund distribution across more than 200 countries [8]

Financial Performance - PayPal's total payment volume (TPV) reached $458.09 billion, representing an increase of 8% (7% FXN)[51] - Revenue amounted to $8.42 billion, showing a growth of 7% (6% FXN)[51] - Transaction Margin Dollars (TM$) totaled $3.87 billion, up by 6%[51] - TM$ excluding interest on customer balances was $3.55 billion, reflecting a 7% increase[51] - Non-GAAP EPS stood at $1.34, indicating a 12% growth[51] - Adjusted free cash flow reached $2.28 billion, a substantial increase of 48%[51] Key Growth Drivers - Venmo revenue grew by 20%, with TPV increasing by 14%[16] - Branded experiences TPV increased by 8% FXN, with branded online checkout TPV growing by 5% FXN[16] - PSP TPV grew by 6%, including Enterprise Payments TPV growing by mid-single-digits[16] Future Outlook - The company raised its FY'25 non-GAAP EPS growth guidance to 15%-16%[11]

Core Insights - PayPal is set to release its third-quarter earnings results, with analysts expecting earnings of $1.20 per share and revenue of $8.23 billion, reflecting a year-over-year increase from $7.85 billion [1] - The company has introduced a 5% cash back offer on buy now, pay later (BNPL) purchases to support U.S. shoppers during the holiday season [2] - PayPal's stock closed at $70.25, showing a 0.7% increase [2] Analyst Ratings - Citigroup initiated coverage with a Neutral rating and a price target of $78, with an accuracy rate of 72% [4] - Wolfe Research downgraded the stock from Outperform to Peer Perform, maintaining an accuracy rate of 70% [4] - Canaccord Genuity maintained a Buy rating with a price target of $96, achieving an accuracy rate of 80% [4] - Macquarie kept an Outperform rating with a price target of $95, with an accuracy rate of 81% [4] - JMP Securities maintained a Market Outperform rating but reduced the price target from $110 to $100, with an accuracy rate of 76% [4]

Core Insights - The UK BNPL (Buy Now, Pay Later) market is undergoing significant regulatory changes aimed at increasing consumer protection and lender accountability [2][6][19] - The Financial Conduct Authority (FCA) will impose stricter checks and regulations on BNPL providers, aligning them more closely with traditional lending practices [3][6][10] Regulatory Changes - Starting mid-2026, BNPL providers will be required to conduct more detailed affordability checks for customers, moving away from the current practice of minimal checks based on self-reported income and expenditure [1][6][8] - The FCA will oversee the BNPL market, ensuring that customers receive the same protections as traditional borrowers, including the ability to escalate complaints to the financial ombudsman [6][11] Market Dynamics - The BNPL market has seen substantial growth, with approximately 11 million UK adults using BNPL products in the year leading up to May 2024, an increase from around 8.8 million two years prior [5] - The rising cost of living has heightened demand for BNPL services, as they provide a means for consumers to manage larger, unexpected expenses [4][5] Business Implications - Companies will need to adapt their business models to comply with new regulations, which may include obtaining consumer credit licenses and implementing more rigorous application processes [13][15] - Providers that can effectively integrate regulatory compliance with innovative solutions are likely to thrive in the evolving financial landscape [18][19] Consumer Impact - Enhanced checks are expected to reduce the number of customers approved for BNPL lending who cannot afford repayments, thereby decreasing the risk of unmanageable debt [10] - Firms will be required to communicate with customers regarding missed payments and direct them to debt advice services if necessary, reinforcing a customer-centric approach [12][16]

Core Insights - Affirm Holdings Inc. is expanding its presence in the payments sector through partnerships with Fanatics and FreshBooks, targeting both consumers and small businesses [1][3]. Group 1: Partnership with Fanatics - Affirm will integrate buy now, pay later (BNPL) options into Fanatics' online sports merchandise platform, allowing customers to split purchases into biweekly or monthly payments [3]. - The offering will extend to over 180 additional team and league stores within Fanatics' network, including select locations in the U.K. and Canada [3]. - Affirm emphasizes transparency in its payment plans, which come with no hidden fees or compounding interest, differentiating itself in the BNPL market [5]. Group 2: Partnership with FreshBooks - FreshBooks has partnered with Affirm to allow its customers in the U.S. and Canada to offer clients the ability to pay invoices through Affirm, with flexible installment plans starting as low as 0% APR [5]. - This partnership positions Affirm to capture the growing demand for alternative payment methods among small business owners and freelancers, a market that has been slower to adopt consumer-style financing tools [6]. Group 3: Market Context and Strategy - The BNPL payment option remains relatively niche, with only 8.3% of consumers using it for non-grocery retail transactions, and an even smaller share of 3.8% using it for groceries [5]. - The B2B use cases for embedded financing tools like BNPL represent an underutilized opportunity, with complexities in business transactions slowing growth [6]. - Affirm is expanding its offerings ahead of the busy holiday season, including a 0% APR promotional event and a partnership with Ace Hardware [6].

Core Insights - Affirm Holdings Inc. is expanding its presence in the payments sector through partnerships with Fanatics and FreshBooks, targeting both consumers and small businesses [3][5][6] Group 1: Partnership with Fanatics - Affirm will integrate buy now, pay later (BNPL) options into Fanatics' online sports merchandise platform, allowing customers to split purchases into biweekly or monthly payments [3][4] - The offering will extend to over 180 additional team and league stores within Fanatics' network, including select locations in the U.K. and Canada [3] - Affirm emphasizes transparency in its payment plans, which come with no hidden fees or compounding interest, differentiating itself in the BNPL market [5] Group 2: Partnership with FreshBooks - FreshBooks has partnered with Affirm to allow its customers in the U.S. and Canada to offer clients the ability to pay invoices through Affirm, with flexible installment plans starting as low as 0% APR [5][6] - This partnership positions Affirm to capture the growing demand for alternative payment methods among small business owners and freelancers, a market that has been slower to adopt consumer-style financing tools [6] Group 3: Market Context and Strategy - The BNPL payment option remains relatively niche, with only 8.3% of consumers using it for non-grocery retail transactions and an even smaller share of 3.8% for grocery purchases [5] - Affirm is looking to expand ahead of the busy holiday season, having recently added a 0% APR promotional event and partnered with Ace Hardware [6]

Core Insights - Millennials are facing financial challenges during the holiday season due to rising costs, caregiving responsibilities, and delayed wealth milestones, despite earning more than a decade ago [1] Group 1: Holiday Budgeting - Many millennials are projected to keep their holiday spending flat this year, making early budgeting crucial to avoid impulsive spending and unexpected debt [3] - Financial analysts recommend starting the holiday shopping season with a clear budget based on what can be paid off by the end of March next year [4][6] Group 2: Buy Now, Pay Later (BNPL) Usage - A significant portion of millennials (54%) considered applying for a BNPL loan in September 2025, making them the most likely generation to use this payment method [5] - Overreliance on BNPL can lead to expensive debt, with 57% of millennials regretting a BNPL purchase [5] Group 3: Credit Card Rewards - Many millennials are missing out on valuable credit card rewards by not planning their holiday spending strategically [7]