Monness Crespi Hardt initiated coverage of American Express (NYSE:AXP), MasterCard (MA), and Visa (NYSE:V) at Neutral in a note to clients Wednesday, noting that slowing consumer spending puts the consensus at risk of downward revisions.
"American Express, Mastercard (NYSE:MA), and Visa have long been the beneficiaries of PCE growth and carded penetration growth," analysts said. They think the trend continues, but the second derivative of volume growth will flatten in the peer-to-merchant (P2M) world (and could meaningfully slow in a recession)."
Analysts add that they are less convinced of the moat outside the core P2M business for these network operators.
"Similarly, we believe that, in a softening economy, the looming specter of litigation and regulation is augmented; see the timing of Durbin 1.0. A further knock-on: the new growth avenues for Visa/Mastercard are less tollbooth businesses," analysts added.
Analysts also stated that while the card volume total addressable market is "indubitably large" and the core business model strong, macro remains a headwind for the companies, as well as a shadow of regulation and legislation.