Visa, Mastercard Still Have Bulls Charging

"Because Visa reports core volume-based revenue on a lag, we see little risk to [fiscal third-quarter] results," JPMorgan Chase analyst Tien-tsin Huang writes on Monday. "The focus will be on commentary on recent trends, where there is evidence of stability, given better than feared domestic bank data reported in the last several days."

JPMorgan's Huang also rates both Visa and MasterCard at overweight.

Huang also pointed to improved data on consumer spending trends. Still while the analyst is "confident" of purchase volume and transaction trends, Huang is less confident in cross-border spending trends.

In a separate note on MasterCard, the JPMorgan analyst said that while the quarter's results should be "good enough," it is "still too early to call for anything better than stabilization as near-term comps remain tough and the outlook on cross-border [spending] remains hazy."

Bob Napoli, an analyst at Piper Jaffray also has buy-equivalent ratings on Visa and MasterCard.

He points out that declining credit card sales volume growth at JPMorgan Chase and Bank of America, two large payments customers of Visa, was slightly less than expected, meaning that purchase volume from Visa's credit card business, while still expected to decline, may exceed his expectations.

On the other hand, MasterCard's U.S. credit purchase volume has been additionally impacted by Citi's continued struggles, one of its largest customers, he writes.

Both companies' revenue growth "will accelerate significantly" in the December quarter due to transaction fee price increases, higher gas prices, the "lapping" of foreign exchange trends, and continued signs of stabilizing consumer spending and bank card spending trends.

"Generally speaking, in this slow/no growth environment, we believe that top-line growth is worth more of a premium, and that investors will pay up for companies that can grow revenue," he writes in a note.

--Reported by Laurie Kulikowski in New York.

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