Euronet Worldwide: DA Davidson's Payments Alternative To Western Union, MoneyGram

The Western Union Company WU is reportedly looking to acquire Moneygram International Inc MGI in a merger that looks unappealing for investors, according to D.A. Davidson. 

The Euronet Worldwide Analyst

Peter Heckmann maintained a Buy rating on rival Euronet Worldwide, Inc. EEFT with a $150 price target. 

The Euronet Worldwide Thesis

Western Union is the largest branded money transfer company, with an approximate 12% market share, while Moneygram is a top-five player with an approximate 5% share, Heckmann said in a Tuesday note. (See his track record here.)

A combination of the two won't result in a stronger entity; will face regulatory scrutiny; and will take time to close, the analyst said.  

Euronet deserves credit for taking market share away from both Western Union and Moneygram over the last 10 years through more aggressive retail pricing and more generous terms for agents, he said. 

Over the same time period, Western Union appeared to be "content" to charge higher prices and hasn't responded to Euronet's discounted pricing in most of its markets, Heckmann said.

Moneygram continues to struggle with an over-leveraged capital structure and regulatory problems, the analyst said. 

Euronet remains "well-positioned" to continue taking market share away from the two companies and working on expanding its approximate 5% market share in the global money transfer business, according to D.A. Davidson. 

The company has exposure to 160 countries and nearly 400,000 agent locations worldwide, Heckmann said. 

WU, MGI, EEFT Price Action

Shares of Moneygram were higher by 30.31% at $3.38 at the time of publication Tuesday. Western Union shares were up 11.2% at $23.03. Euronet shares were trading 10.62% higher to $108.64. 

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