V Remains Morgan Stanley's Top Pick

In a report focusing on Visa V, Morgan Stanley states that the company's secular and improving cyclical trends are driving to-line growth. “While solid revenue growth trends remain very encouraging, the lower A&M spend (which may discount the EPS beat to some) questions whether 62% operating margins can be sustained, and lingering uncertainty about the Durbin impact to F12 EPS may create a temporary pause in the recent rally (V is up 6% in the last month and 500 bps ahead of the market),” Morgan Stanley writes. “We continue to believe that V needs to continue to balance near-term execution with longer-term growth initiatives, and this quarter and mgmt's commentary suggests that strategy is still very much intact. We don't anticipate any material weakness in the stock from 2Q results, and at current levels (14x C12 EPS). V remains our top pick with the best risk/reward in our group.” Visa closed Thursday at $78.70.