MasterCard, Visa Investors: Goldman Says Macro Data More Predicative Than Retailer Data
Following weak results reported by certain retailers over the past weeks, there are concerns over whether this indicates a softening of volumes at Visa Inc (NYSE: V) and Mastercard Inc (NYSE: MA), Goldman Sachs’ James Schneider said that macro data points are a better indicator of payment networks’ purchase volume than the data points from traditional retailers.
Analyst James Schneider stated that payment network volume growth in the US remained strong. He pointed out that the US Census had reported April retail sales growth of 3.0 percent y/y, up from the 1.7 percent y/y growth recorded for March.
Schneider added that weakness in sales for traditional retailers largely reflected secular headwinds related to the ongoing shift in consumer spending behavior away from department stores and was not a broader decline in domestic consumer spending trends.
Visa And MasterCard
The analyst reiterated Buy ratings for both Visa and MasterCard, while keeping the former in the Conviction List. He highlighted that US retail sales had historically exhibited a good correlation with Visa and MasterCard purchase volumes of 71 percent and 80 percent, respectively.
“While we recognize that weak department store volume could limit near-term potential upside to Visa and MasterCard’s results, we believe this headwind is being more than offset by a volume uptick in select retail subcategories including services, online and restaurants,” Schneider wrote.
Payments are up 2.6 percent and C&O rose 1.8 percent in the first half of May.
Short interest increased for:
- Vantiv Inc (NYSE: VNTV) – 48 percent
- FleetCor Technologies, Inc. (NYSE: FLT) – 29 percent
- Square Inc (NYSE: SQ) - 25 percent
- Sabre Corp (NASDAQ: SABR) – 21 percent
Short interest decreased for:
- Global Payments Inc (NYSE: GPN) - (44 percent)
- Automatic Data Processing (NASDAQ: ADP) - (20 percent)
- Moneygram International Inc (NASDAQ: MGI) - (16 percent)
- Cognizant Technology Solutions Corp (NASDAQ: CTSH) - (13 percent)
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