Market Overview

Virtual Cards: The Large 'Untapped' Market That Could Disrupt Commercial Payments

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Virtual Cards: The Large 'Untapped' Market That Could Disrupt Commercial Payments
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  • Shares of FleetCor Technologies, Inc. (NYSE: FLT) increased nearly five-fold over the past five years as the virtual payment market began gaining momentum.
  • Deutsche Bank maintained a Buy rating on FleetCor Technologies with a price target raised to $184 from $170.
  • The company is "best positioned" to continue capturing growth within the virtual card market can grow from $83 billion in 2015 to $160 billion in 2018 and over $500 billion by 2024.

Virtual cards could serve as a "catalyst" for card adoption in commercial and business-to-business (B2B) payments which could double US purchase volume to $160 billion by 2018 (reaching above $500 billion by 2024) from $83 billion in 2015, according to a new report by Ashish Sabadra of Deutsche Bank.

As a reminder, a virtual card is a credit, debit, or prepaid virtual card (a physical card does not exist) and can be automatically generated online with a unique 16-digit number and can even be used for one time use. The account number stays active for a pre-determined time period and can be used for online, phone, fax and mail purchases.

In a report published Thursday, Sabadra argued that virtual cards improve cash flow for the receiving party while offering cash rewards to the payers. In addition, virtual cards have seen improvements in operational efficiency, security and lower fraud usage.

FleetCor Technologies is an independent global provider of fuel cards, commercial payment and data solutions and was named by Sabadra as being the "best positioned" company within the space to expand into new verticals and international markets through organic growth and acquisitions.

Sabadra continued that FleetCor Technologies grew its revenues at a compounded annual growth rate of 29 percent from 2009 to 2014 while its earnings per share grew at a compounded annual growth rate of 31 percent over the same time period. The analyst is expecting the company to deliver low teens organic revenue growth and earnings per share at a compounded annual growth rate of over 20 percent over the next few years as the market continues to rapidly grow.

Shares of FleetCor were maintained at Buy with a price target raised to $184 from a previous $170.

Latest Ratings for FLT

DateFirmActionFromTo
Nov 2016Wells FargoUpgradesMarket PerformOutperform
Oct 2016William BlairInitiates Coverage OnOutperform
Sep 2016BarclaysMaintainsOverweight

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Posted-In: Ashish Sabadra Deutsche Bank fleetcor technologies Virtual CardsAnalyst Color Long Ideas Analyst Ratings Trading Ideas Best of Benzinga

 

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