Visa, MasterCard Get Lift From Upgrade

NEW YORK (TheStreet) -- MasterCard (MA Quote) and Visa (V Quote) shares rose Monday after Credit Suisse upgraded both electronic payments companies to the firm's equivalent of a buy rating.

Credit Suisse equity analyst Moshe Orenbuch raised his rating on both firms to outperform from neutral because of "stabilization" in spending volumes, which will translate into improved revenue growth for Visa and MasterCard in the coming quarters. Longer term, while the global economic downturn still exists, "the secular shift from cash to plastic continues," Orenbuch writes in a note.

"Recognition of both these items should translate to higher multiples for the stocks," he writes.

Analysts are generally bullish on both companies these days. Since neither issue credit card debt, they have held up well during the economic downturn, unlike competitors American Express (AXP Quote), Discover Financial (DFS Quote) and Capital One (COF Quote).

Orenbuch also increased the 12-month share price targets for the stocks. He raised Visa's price target by $14 to $84; and MasterCard's by $45 to $255.

He established 2011 EPS estimates, saying he expects MasterCard to earn $15 a share in two years, up 19% from his 2010 earnings estimate. Visa is expected to make $4.15 a share, also up 19% from the preceding year.

"Our revised forecasts for the networks contemplate 600-800 basis points of additional revenue growth in the coming quarters compared to the first half of 2009," the note says.

Signs of stabilizing payment trends seen in the recent quarterly reports of both companies are being fueled by debit transactions. Management teams at Visa and MasterCard indicated purchase volumes for the September quarter "were tracking in line to slightly faster than the June quarter," he writes.