Deutsche Bank reaffirmed its Buy rating on Visa Inc V after its meeting with the CFO reinforced its bullish thesis on the stock.
Analyst Bryan Keane said CFO Vasant Prabhu was bullish about several growth drivers including U.S. consumer strength, a rebound in cross border volumes, Visa Europe tracking better than expectations, and a strong pipeline.
Prabhu, according to Keane, has sounded upbeat over the potential for large deals, Costco Wholesale Corporation COST driving Visa cards to the top of the wallet, the USAA migration, India demonetization, and incremental processing opportunities.
“We believe expenses are running less than originally planned (potentially Incentives as well) which could result in stronger than expected numbers for FY17,” Keane wrote in a note.
Further, Keane believes cross-border revenues can be 6x to 7x more profitable than domestic transactions and the weakening of the GBP has driven significant UK inbound cross-border volume growth.
“Given recent trends, we believe cross-border will likely continue to contribute toward accelerated volumes and growth in the business,” Keane continued.
Further, the analyst said Visa Europe tracking well and had a solid start with strong volumes, and Prabhu remains bullish on opportunities to increase yields.
Visa also believes incentive amortization accounting rule change could improve revenue stability and expects elevated buybacks to continue for 6-7 quarters post the Visa Europe acquisition.
In addition, Visa could pursue large commercial opportunities such as transportation and cautiously optimistic about large volume increases from Paypal Choice.
"Despite a strong performance YTD, our confidence in recommending V as our Top Pick in the Payment Sector only increased following the meeting," Keane added.
At last check, shares of Visa were up 0.28 percent to $89.99. Keane has a price target of $103.
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