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The Ratings Game: Visa’s ‘more defensive’ stance makes it well suited for choppy times, Goldman Sachs says


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

and Mastercard Inc.

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.
while taking a neutral stance on shares of Fiserv Inc.
Global Payments Inc.
Shift4 Payments Inc.
and PAR Technology Corp.

“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.

“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.

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