BofA Downgrades Western Union On Valuation, Says Visibility Limited

Although shares of The Western Union Company WU have significantly outperformed the S&P500 since early April, visibility into the company’s performance through 2020 and 2021 remains limited, according to BofA Securities.

The Western Union Analyst

BofA’s Jason Kupferberg downgraded Western Union from Buy to Neutral and raised the price target from $23 to $26.

The Western Union Thesis

Western Union’s stock has recently been propelled by an investor preference for value names, media reports of a potential merger with MoneyGram International Inc MGI, and a better-than-anticipated mid-quarter update on June 2, Kupferberg said in the Wednesday downgrade note. (See his track record here.)

The strategic value of acquiring MoneyGram International is questionable, since both companies “face very similar potential longer-term structural headwinds related to industry competition and technology disruption,” the analyst said.

Regarding the mid-quarter update, he said that transaction growth in Western Union’s core consumer-to-consumer business seems to be progressing well.

This may not significantly contribute to revenue growth given the digital-heavy mix, especially where Western Union merely acts as a backend processor, Kupferberg said. 

“While we continue to believe WU's consumers are more resilient than the Street thought, visibility on estimates this year and next remains limited, and we see risk/reward as balanced.”

WU Price Action

Shares of Western Union were down 3.69% at $23.51 at the time of publication Wednesday. 

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Photo by Usien via Wikimedia.