Morgan Stanley Analyst Sees Upside for Visa and Mastercard as Cross-Border Travel Strengthens

Morgan Stanley analyst James Faucette reiterated Overweight ratings on Visa Inc (NYSE: V) with a $290 price target and Mastercard Inc (NYSE: MA) with a $440 price target in a Wednesday note titled Payments and Processing: V/MA 2Q23 Preview: Cross Border Can Support Upside as Domestic Spend Slows.

The analyst continues to expect that strength in international travel can drive an upside to Visa and Mastercard's earnings, especially given that cross-border volumes generate higher yields and margins than domestic volumes. 

He still sees some pockets of recovery left to recapture and expects cross-border travel to be a key growth driver for V and MA.

He adds that bank card spending data suggest slowing domestic U.S. volume growth. 

With V and MA historically traded at a 10-14x premium to the S&P (on an NTM P/E basis) and now trading at 6-9x, he thinks recent underperformance relative to the market offers a compelling valuation with macro risks fully priced in, supporting his Overweight call on the stocks. 

Price Actions: V shares traded higher by 0.26% at $241.40 on the last check Wednesday. MA shares traded lower by 0.22% at $397.32.

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