Visa at New Highs as Nomura Sees Western Union Value Trap
Visa advanced $2.70, or 1.7 percent, to $162.79 at 11:52 a.m. in New York. The shares earlier touched $162.92, the highest intraday price since the Foster City, California-based company’s March 2008 initial public offering. Western Union, the world’s largest money-transfer business, slid 0.6 percent to $14.55 and has dropped 19 percent in the past year.
“Visa continues to thrive in a world of electronic payments,” Bill Carcache and Tulu Yunus, Nomura analysts, said today in a research note. Englewood, Colorado-based Western Union, which benefits from paper-based transactions, is “a value trap based on our belief that its core money-transfer business is in secular decline,” they wrote.
Worldwide purchases with credit and debit cards are projected to surpass $21.3 trillion in 2016, a 73 percent increase from 2011, according to the Nilson Report, an industry newsletter. Visa, the world’s biggest payments network, posted a $1.29 billion profit in the fiscal first quarter ended Dec. 31, a 26 percent increase from a year earlier, as card spending climbed 8.7 percent.
“Our No. 1 competitor is cash,” Visa Chief Executive Officer Charlie Scharf, 47, said last week during an investor presentation. “There is so much cash out there that our jobs have to be to eliminate the cash.”
MasterCard Inc. (MA) CEO Ajay Banga, 53, whose Purchase, New York-based company runs the second-biggest network by processed transactions, previously declared a “war on cash.”
Western Union said last month that fourth-quarter profit plunged 47 percent to $237.9 million and that it expects “low single digit” revenue declines this year before sales and profit growth resume in 2014.
Carcache and Yunus, who titled their research note “Cash Is Not King,” have an overweight rating on Visa and a target price of $172. They rate Western Union as neutral and predict the shares will fall to $13.
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