Technicals show the uptrend intact and that recent consolidation has upward bias.
No guarantees in this market with overall valuations so inflated but it's good to be in a ticker with a 10 PE and such solid cash generation. 10 PE is well below the long term historical average index multiple of about 14 PE. Market currently sporting 18 PE.
Moreover, I can guarantee you that while EBAY is on GOOG's radar screen, GOOG could give a flying F about WU.
Wall Street loves two hack-analyst theories.
Freshman version: GOOG will own you
Sophomore version: In the near future, all things will be found on GOOG, made by AAPL, bought from AMZN, paid for by EBAY (PayPal), and shared on FB.
If (big if!) GOOG manages to deploy this system and it passes regulatory or compliance muster (another big if! - have fun with that, GOOG), its main competitor would not be WU, but EBAY (PayPal) because the GOOG system is web-dependent and bank-dependent.
The counterintuitive concept for being long WU is that the non-web space in the WU industry, where WU dominates, is extremely valuable, yet the web space is comparatively easy for WU to penetrate, while the billion-dollar-per-year space WU now dominates is totally inaccessible to GOOG (and EBAY). Yes, WU must grow electronically - it has no choice, it is a must - but that growth is also both large and incremental (gravy) - the cannibalization component is small. In other words, WU is not Blockbuster Video and EBAY is not NFLX. WU doesn't have branches, it has agents; the agents are not cost centers, they are revenue centers. Anyway
Other dividend sectors, like utilities and consumer staples, are trading at 17X and 18X earnings. I don't think the market can endlessly power forward to new highs unless earnings grow. JCP is toast - amazed that isn't grasped - and DELL is a Rust Belt company.
WU trades for under 10X. Will WU benefit from movement of yield investors to stocks? Or are we headed right back to low share prices if the market unwinds? Will WU buck a downtrend, or be swept up in it? Will WU again be undone by a stupid rumor that GOOG will crush it like a grape at will?
I hear GOOGLE AIRLINES WILL FLY TO ANY AIRPORT YOU WANT
and you will be able to BUY PRETZELS AND PEANUTS WITH BITCOINS!
U. S. DEALS BLOW TO BITCOIN
Remember when Western Union was dead because of Bitcoin, some pseudo currency that comes from Magic The Gathering or something? Bitcoin would replace CASH.
Google is a possible threat to WU in two ways:
1) If Google decided to enter the money transfer business, it could, of course, be another competitor to WU... ...just like all the existing panoply of competitors, including bank wire transfer. Alternatives are alternatives. But there are 500,000 Western Union agents in the world. There are zero PayPal and Google agents.
2) Apple has plunged, and Wall Street needs, for PR and greed reasons, another Holy Company, another Halo Effect Company, another Company Destined To Conquer All. That company is already definitely Google. So potentially, we could be entering a kind of rumor-mill situation where Google can tank other companies' stocks just on rumors that it might enter the business.
I hear Google is going to open coffee shops! SBUX -15%
I hear Google is entering the steel industry! And the steel will be, like, free! X -22%
I hear Google is going to smelt aluminum! AA -37%
I hear Google is starting Google Airlines! And you won't have to pay to fly! It'll be free flights on Google! LUV -21%
I also read an article today - and I'm not joking - that Google will tie up with Tesla.
WHIZ BANG WOW GQQGLE
Looks like that's THE END for Ford, GM, and Toyota! Those stupid moron companies, they have nothing on Google! As soon as Tesla builds the self-driving Tesla, which you'll need Google Glass to operate of course, why... ...YOU'LL BE ABLE TO SEND MONEY, FROM YOUR TESLA, AND ANYONE IN THE DEVELOPING WORLD (WHO DRIVES A TESLA) WILL GET THE MONEY *IN THE TESLA*. :-D
One of the points in the 5/10/13 Forbes article was that Internet-based solutions such as PayPal aren't comparable, because it can take several days to a week for the money transfer to be accomplished, whereas a transfer by Western Union is instantaneous.
Sorry - my eyes are still rolling. I wasn't ridiculing your question.
Google is a search engine, and it can't even put Yahoo out of business.
Not saying Google sucks. It is an amazing, valuable company, run by smart people. But I think the "inevitable technological convergence of doom" argument is the thinnest argument ever made in the business world. It's never overnight and it very seldom plays out like people assume it somehow must.
Just reading now. Thank you for the compliment :-) Here's what I think:
Apparently Google (quietly) thinks that it will be possible to gmail money for free to anyone using Google Wallet. Suddenly, now, even though Google Wallet and Gmail are old. ...I guess PayPal and Western Union didn't think of this? Visa, MasterCard, they're gone also, by the way. Gone. Puff of smoke. Yahoo: Gone. (But NOT MoneyGram). :-) Boy, Google is SO SMART these other lame-o companies are TOTAL MORONS. Cut up your Visa card! Just Google the cash!
A few months ago, I thought PayPal was going to destroy Western Union. Now Google will destroy PayPal and Western Union before PayPal can destroy Western Union. In the end, does Xoom destroy Google?
Google... ...has a lot of big ideas. The self-driving car will replace driving (except, it never will, as no one wants a self-driving car). Everyone will wear Google Glass because we want computers on our faces all the time (no one does). Google Plus, that will blow Facebook and LinkedIn away - give that about a week (no one uses Google Plus). And now, I see magically compliance-free, totally costless money transfers will put PayPal and Western Union out of business by the end of 2013. So everyone go sign up for Google Wallet please. Trust Google, and remember boys and girls, don't be evil.
Yes, I can see it now: everyone in the cash-dependent developing world, with no bank account, will run quick to the nearest computer, and go sign up for Google Wallet. (Mmm hmm!) Though dependent on remittances, they will buy a $500 smartphone, to make it more even more digitally convenient.
Any time I hear that any company - and *particularly* Google - has some magic way that will instantly destroy other multibillion-dollar enterprises in one fell swoop, I know what to think: Prove it, Google. Do it.
Market doesn't think WU is OOB. Looks like consolidation to me, today, on a sideways market day, despite Google having changed the world
David that's a good observation. You are right that illegal immigration has declined. However, serving that particular market is only a small slice of WU revenue pie; it is a much bigger slice for its competitors. WU is truly global. Second, illegal immigration has shifted: it is less Mexican, and more Central American, than before, as Mexico prospers. Third, even though total transactions in the US/MX corridor are in decline (as per Citibank), WU's transactions in that corridor grew last Q - they are taking share. Fourth, the phenomenon you describe is not new - arguably it dates from 2008 or so, when housing collapsed and construction jobs also. Yet, WU chugs along steadily - the core business is totally intact despite the trend, not shrinking (meaningfully - shrinking slightly because of the new pricing strategy but not because of what you describe). I think the need of the world's unbanked, underbanked, and cash-intensive is only going to grow - a huge proportion of those transactions are black market - while WU is also becoming more digital, winning new customers. Pie looks expanding to me.
The company obviously has a customer base; the more important question but less clear is how the size is trending. Latest information I have is that the illegal immigrant trend is going south(i.e. down).Pardon the pun. The company also has other competitors who are going after this base. And new immigration laws could be a big game changer. But I agree with the idea that wall street analysts do not understand immigrant behavior.