Jefferies Met With Visa Management And Got 'Positive Vibes;' Still Prefers Mastercard

Jefferies analyst Jason Kupferberg and his team met with Visa Inc V’s management on Wednesday and left with “positive vibes.” With their thesis intact, they reiterate a Buy rating and $75 price target.

According to the note, the analysts remain optimistic not just because of the ongoing secular tailwinds and the company’s powerful competitive moat, but also because they see the business “gradually evolving into a more merchant-oriented, technology-centric enterprise, which should enhance long-term shareholder value amid a regulatory environment offering more opportunity than in the past.”

The analysts outline a few key points to their investment thesis:

• Visa continues to make proactive and innovative investments to enhance its competitive position in a world where mobile and digital payments a starting to displace old-fashioned cards.
• Although timing remains impossible to predict, the firm believes “Visa is well-prepared financially and operationally for an eventual exercise of the Visa Europe put option."
• The current global regulatory environment does not pose any major hurdles for Visa. “The company has successfully adapted to new processing rules in Russia [and] The planned opening of the domestic China market is a positive regulatory development for V,” as well as for Mastercard Inc MA.
• Jefferies believes Visa’s new CFO will mostly maintain the company's historical capital deployment plan, which contemplates a mix of share buybacks and dividend payments.

Consequently, the analysts remain very positive not only on Visa, but also on Mastercard, “because of their highly predictable 15-20% EPS growth profiles, durable competitive moats, and a relatively calm regulatory backdrop at the moment.” However, they shifted their slight preference to Mastercard on early-May, as the company sets up quite attractively for 2016, “as multiple headwinds (rebates, FX, gas, Chase) anniversary, improved European macro may help, and new volumes from recent Citi and Itau contract renewals could ramp."