Visa Stock Cut to Neutral as Guggenheim Sees Virus Hurting Payment Sector

Guggenheim analyst Jeff Cantwell downgraded Visa shares to neutral from buy, saying the coronavirus will hurt the payments sector.
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A Guggenheim analyst on Wednesday downgraded credit-card giant Visa  (V) - Get Report to neutral from buy, citing continued concern about the impact of the coronavirus pandemic on the payments sector.

Shares of the San Francisco company at last check were 2.8% higher at $164.95.

Analyst Jeff Cantwell, who removed his $230 price target on Visa shares, told clients that he cut his estimates and price targets across the payments space as he updated his models ahead of the earnings reporting season for the group. 

He said that he expected the second quarter to be the bottom in payments and that the two following quarters would be better sequentially but below 2019's results. 

Cantwell said that although the worst will soon be behind us, he is generally less positive about the sector's outlook than he was in past years due to higher unemployment, changing consumer behaviors, business defaults, and other factors. 

He cites "largely the same reasons" that motivated his downgrade of MasterCard  (MA) - Get Report last week for his change in rating for Visa. He called covid-19 "a paradigm-changing event" that is going to result in long-term headwinds to payments volumes.

Visa is scheduled to report second-quarter earnings next week. The company is expected to post $1.35 of earnings, up 3.1% from a year earlier, and revenue is expected to total $5.8 billion, up 5.6%, according to Zacks Investment Research.

Last week, Jefferies analyst Trevor Williams reduced his ratings on Visa and Mastercard due to the economic fallout from the coronavirus crisis.  

The two dominant players in the credit-card business have been hit hard by the near shutdown in international travel, with the downturn in the sector likely to last longer and run deeper than current consensus estimates, according to Jefferies.

Mastercard was climbing 4.2% to $255.75, while American Express  (AXP) - Get Report added 1% to $82.35.