MoffettNathanson analyst Lisa Ellis said in a note from Tuesday that two credit card companies are “in rarefied air among investment opportunities.”
In the note, Ellis reiterated her Buy rating on both stocks, and raised her price target for Mastercard to $365 and for Visa to $230, suggesting upside of 18% and 19%, respectively.
The analyst doesn’t see any end in sight for both stocks’ stellar financial performances. Over the last year, both stocks have surged with Visa shares gaining 40% and Mastercard shares rising 58%.
According to Ellis, while Mastercard has outperformed Visa over the last year, both companies have been “permanently rerated,” and their valuations aren’t likely to fall because both companies have “demonstrated the consistency” in their business models.
They’ve also “dispelled disruption fears with [their] recent spate of partnership with digital wallets (e.g., Paytm, Alipay) and tech giants (e.g., Apple, Amazon),” Ellis wrote.
Ellis added that the key for Visa will be to close its share price performance with Mastercard, and could do so if it’s able to successfully integrate its European platform.
Susquehanna analyst James Friedman has said that Visa could close its valuation gap with Mastercard thanks to its “prominent commercial practice, targeting key international markets, and is experimenting with service fees.”
While Wedbush’s Moishe Katri said Visa’s earnings “will likely be augmented by ongoing efforts to target other, relatively under-penetrated alternative payments markets, including [business-to-business].”