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- Morgan Stanley analyst James Faucette highlights that banks have reported stable card spending volumes (a combined 7.9% YoY increase in total card spending).
- While this is below consensus for Visa Inc's (NYSE: V) (Overweight rating and $288 price target) U.S. volume growth of 9.4% in 1Q (vs. 9.1% in 4Q), he believes the broader trend of stable growth and slight acceleration is in-line with expectations.
- Meanwhile, the analyst notes that consensus for Mastercard Inc (NYSE: MA) (Overweight rating $438 price target) U.S. volume calls for a 2-point acceleration to 10% in 1Q.
- When there are more significant variances between estimates for V and MA and actual U.S. card volumes, the analyst points out that the networks will usually employ cost controls to either beat or meet EPS estimates.
- Caution remains on the magnitude of potential slowing in March and April.
- Given improving travel trends, room for further recovery, a positive outlook on bookings, and a relatively limited impact on travel spending in a downturn vs. what most would expect, the analyst remains bullish on the cross-border travel story.
- With V and MA historically trading at a 10-14x premium to the S&P and now trading at 7-9x, the recent underperformance relative to the market offers a compelling valuation with macro risks fully priced in, supporting his Overweight call on the stocks in an April 20 note.
- Price Action: V shares traded higher by 0.77% at $234.35 on the last check Thursday. MA shares traded higher by 0.51% at $374.72.
- Photo via Wikimedia Commons
| Jan 2022 | Barclays | Maintains | Overweight | |
| Jan 2022 | Wedbush | Maintains | Outperform | |
| Jan 2022 | Raymond James | Maintains | Outperform |
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