By Emily Bary
Visa Inc.’s “more defensive” positioning just earned it a strong endorsement from a Goldman Sachs analyst.
Goldman’s Will Nance initiated coverage of Visa /zigman2/quotes/203660239/composite V +0.40% and Mastercard Inc. /zigman2/quotes/207581792/composite MA +1.27% shares with buy ratings late Tuesday, but only Visa’s stock cracked Goldman’s Conviction List. While he sees both companies as well positioned to capitalize on a recovery in cross-border spending and increased momentum for electronic payments, he deems Visa’s business mix better suited for the choppy economic landscape.
“While V is clearly exposed to overall macro trends in spending, we are incrementally more constructive on Visa’s US-centric, debit-heavy business mix, which we see as more defensive in times of greater macro uncertainty relative to MA’s more international and credit-centric business,” he wrote in his note to clients.
Nance set a $282 price target on shares of Visa, with the target about 38% above current levels.
As for Mastercard, Nance noted that the company is set up well to benefit from its “multi-rail” strategy that extends beyond debit and credit cards, and he argued that Mastercard deserves to trade at a multiple that’s a “modest premium” over Visa’s, given Mastercard’s more robust earnings growth.
Though he said that Mastercard “represents an attractive combination of long-term growth, margin expansion, and capital returns,” Visa is his preferred name given its skew toward debit and the U.S.
Nance initiated Mastercard’s stock with a $460 price target, which is about 36% above recent levels.
He began coverage of several other payment-oriented names as well, slapping a buy rating on shares of Fidelity National Information Services Inc. /zigman2/quotes/207166559/composite FIS -0.63% , while taking a neutral stance on shares of Fiserv Inc. /zigman2/quotes/204817680/composite FISV -0.51% , Global Payments Inc. /zigman2/quotes/201234787/composite GPN -1.38% , Shift4 Payments Inc. /zigman2/quotes/218797153/composite FOUR -2.93% , and PAR Technology Corp. /zigman2/quotes/208898026/composite PAR -2.42% .
“Within the large-cap acquirers, we favor FIS, as we believe its banking business should benefit from an acceleration in technology spending, and we also favor its enterprise and e-commerce focused merchant business.”
Nance also assigned a sell rating and $18 price target to shares of Western Union Co. /zigman2/quotes/206269665/composite WU -0.60%
“With management conducting a strategic review of the company’s approach and looking to diversify away from its legacy business by offering a broader suite of financial services to its global immigrant customer base, we believe WU’s strong margins/capital allocation could come incrementally under pressure as the company invests in the highly competitive neo-bank space,” he wrote.