On Wednesday Visa Inc. (NYSE: V) and Mastercard Inc. (NYSE: MA) were two of the nine US payment companies that Mizuho initiated coverage on. Both Visa and Mastercard were given a Buy ratings with a projected price target of $250 and $400, respectively.
Visa and Mastercard are major global payments technology companies that enable consumers, businesses, merchants, and financial institutions to utilize electronic forms of payment.
While card penetration accounts for “two-thirds of V’s volume growth”, results from Mizuho’s survey indicated that there is an upside to card penetration for Visa as the volume growth has remained sustainable in the midst of the pandemic. In addition, Mastercard has been performing well with higher card usage in the United States.
The analysts noted: “Our proprietary consumer survey of several hundred participants across various regions and income levels helps size the magnitude of E-Commerce & overall credit card penetration in the coming years. The data shows outsized penetration for both daily and online spend during COVID (+700bps and +900bps, respectively).” It also suggests that penetration could rise in the near future.
“The debate surrounding both V and MA largely includes their ability to continue to grow US volumes - $4tn, or 45% of V’s total purchase volumes, and $1.7tn, or 35%, of MA’s purchase volumes - at elevated rates, despite poor economic growth, and given that 2020 is already seeing a historic spike in card penetration due to COVID”, stated by analysts.
Overall, the outlook for Visa and Mastercard performance looks promising over the medium-term. Analysts expect that both companies drive high single-digit volume growth in the US. Despite the presence of COVID, both card networks have shown potential for long-term sustainability and strong US growth.
Disclosure: At the time of publication, I have no positions in any of the securities mentioned in this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for creating this article (other than from TheStreet) and have no business relationship with any company whose stock is mentioned in this article.