What's In Your Wallet? New Bull Calls On Visa, American Express

Research analysts Donald Fandetti, Steven DeBartolo and Michael Kaye believe the market is going to continue to reward Visa's strong earnings growth, supported by the secular trend and pricing power. Depreciation of the U.S. dollar at 9 percent is likely to be a tailwind; cross-border volume should improve.

Fandetti, DeBartolo and Kaye also believe upward EPS revisions are likely for 2018. Visa Europe integration should drive expense synergies as the company consolidates processing systems and it is reasonable to expect better yields on renewals, believe Wells Fargo analysts. They have a slight preference for Visa over Mastercard Inc MA.The U.S. regulatory environment is one of the key risks for owning Visa. It is stable at the moment, and the large merchant suit will be a multi-year process. Except for regulation and litigation, digital disintermediation, "banks do it alone" and China UnionPay are also important risks for owning Visa.

Wells Fargo analysts are also positive on American Express as fundamentals and revenue growth are improving. The worst of the negative headlines appear to be behind the company. They expect an EPS increase of 11 percent in 2018. Fandetti, DeBartolo and Kaye see rewards competition as the key risk, but they believe the intensity level has peaked. They think credit is a concern given the company's strong loan growth, but an affluent approach makes it less relative.

Like Visa, American Express is going to benefit from weaker U.S. dollar as 25 percent of its revenue comes from abroad. Fandetti, DeBartolo and Kaye believe American Express is going to beat earnings estimates and they think it could provide a positive update on guidance.