KeyBanc Downgrades Mastercard, Visa On Industry Trends

Mastercard Inc MA and Visa Inc V are likely to generate cross-border revenue short of the Street expectations, given that rising COVID-19 cases, the pace of vaccine rollout and the government response to the situation are weighing on demand for international travel, according to KeyBanc Capital Markets.

The Payments Analyst: Josh Beck downgraded both Mastercard and Visa from Overweight to Sector Weight.

The analyst raised the Mastercard price target from $325 to $345 and reduced Visa's from $225 to $210.

The Payments Thesis: Consolidation has reduced the number of processors, and cloud evolution is “giving rise to a growing number of players on the edges focused more directly on consumers, merchants, and/or banking relationships,” Beck said in an industry note. 

“Visa and Mastercard (payment volume) trends through November generally indicated a gradual moderation since early September,” the analyst said.

Referring to 2021 prospects, he said investors should “expect robust domestic spending trends to be offset by weak x-border trends leading to in-line to slightly below results. Expect limited guidance with a focus likely to be on QTD trends, which we expect have moderated slightly from prior November updates with continued travel headwinds.”

Beck lowered the 2021 earnings estimate for Mastercard from $8.35 per share to $8 per share and for Visa from $6.75 per share to $6.50 per share.