Cash In on Wanderlust: Morgan Stanley Predicts Cross-Border Travel Fueld Comeback for Visa & Mastercard

Morgan Stanley analyst James Faucette highlights that banks have reported stable card spending volumes (a combined 7.9% YoY increase in total card spending).
While this is below consensus for Visa Inc's V (Overweight rating and $288 price target) U.S. volume growth of 9.4% in 1Q (vs. 9.1% in 4Q), he believes the broader trend of stable growth and slight acceleration is in-line with expectations.
Meanwhile, the analyst notes that consensus for Mastercard Inc MA (Overweight rating $438 price target) U.S. volume calls for a 2-point acceleration to 10% in 1Q.
When there are more significant variances between estimates for V and MA and actual U.S. card volumes, the analyst points out that the networks will usually employ cost controls to either beat or meet EPS estimates.
Caution remains on the magnitude of potential slowing in March and April.
Given improving travel trends, room for further recovery, a positive outlook on bookings, and a relatively limited impact on travel spending in a downturn vs. what most would expect, the analyst remains bullish on the cross-border travel story.
With V and MA historically trading at a 10-14x premium to the S&P and now trading at 7-9x, the recent underperformance relative to the market offers a compelling valuation with macro risks fully priced in, supporting his Overweight call on the stocks in an April 20 note.
Price Action: V shares traded higher by 0.77% at $234.35 on the last check Thursday. MA shares traded higher by 0.51% at $374.72.
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