Goldman Sachs (NYSE:GS) analyst Will Nance launches research coverage on eight payment stocks with three stocks getting a Buy rating, four are Neutral-rated and only one payment stock is rated Sell.
The analyst is most constructive on Visa (NYSE:V) and Mastercard (NYSE:MA) given their cross-border exposure. Price targets on V and MA are $282 and $460, respectively.
Visa has a slight edge over Mastercard and is included in Goldman’s Conviction Buy List.
“We believe both companies are likely to continue to deliver HSD revenue growth and high-teens EPS growth for many years to come, supported by persistent tailwinds behind the electronification of consumer spending and the nascent growth initiatives in areas like new flows ($185tn opportunity) and value-added services (for both card and non-card spending). Thematically, we like V/MA for their relative insulation against inflation given 56%/43% of revenues are tied to payment volumes and their attractive leverage to the normalization of cross-border spending,” Nance said in a client note.
Elsewhere, Nance started FIS (NYSE:FIS) at Buy with a $128 per share price target.
“We expect competition in merchant segments to continue to dominate the narrative given the rapid growth of new entrants in the space. Our top pick among the traditional acquirers is Buy-rated FIS, as its online-focused e-commerce business, combined with its comparatively smaller exposure (about 32% of revenue) to the SMB part of the market, where we believe competition is fiercest, positions the company well to navigate the current competitive environment.”
On the other hand, the analyst is bearish on Western Union (NYSE:WU) amid the lack of growth potential. He started at Sell with an $18 price target.
“With the company looking to invest in new growth initiatives beyond its traditional concentration in P2P remittances, we believe investments in growth and deployment of the proceeds from the recent divestiture of the company’s business solutions segment are likely to be a drag on capital return,” Nance concluded.
By Senad Karaahmetovic