The corps of Wall Street stock analysts numbers in the thousands, but at the top stand a select few, those analysts with the experience and savvy to pull together the facts and discern the probable path of the markets. You can find these top analysts, the best of the best, at TipRanks Top 25 Analysts, a list of the Street’s top performing stock watchers.
Among these top analysts, there is a standout. Glenn Greene, ranked #3 overall, is also the top analyst from Oppenheimer, the New York City-based investment bank. The big Wall Street firms are also rated at TipRanks, and Oppenheimer holds the #4 spot among the Top Research firms. This combination of a top individual rating with a top institutional rating gives extra weight to Greene’s stock ratings.
In the last two weeks, Greene has applied his expertise to the major players in the payment processing sector. Let's take a closer look:
We’ll start with Mastercard, by market cap, at $271.4 billion, the second largest credit card company in the world. Strictly speaking, MA is not truly a credit card company; it’s a payment processor. The actual cards are issued by banks or other financial institutions, and branded with Mastercard’s logo. Mastercard, the parent company, collects royalties on the logo and branding use, as well as buyer and seller transaction fees every time such a card is swiped.
It’s a solid and profitable business model, as evidenced by Mastercard’s appreciation since the market bottomed last December. MA shares are up 42.6% year-to-date, far outperforming the broader markets. For comparison, the S&P 500 gain this year is 22.7%. In its Q3 earnings, reported late last month, MA showed an EPS of $2.15 against a forecast of $2.01, and reported a 14% yearly increase in gross dollar volume of transactions, to $1.7 trillion.
Greene noted, “Mastercard delivered strong 3Q19 results with ~16% CC revenue growth and EPS of $2.15... MA modestly increased core FY19 guidance, which now anticipates the high end of low-teens CC revenue growth... We update our estimates to reflect strong quarterly results and now estimate ~18% EPS growth in FY19, which anticipates continued solid broad-based volume momentum.” Greene’s $312 price target on MA suggests an upside potential of 16% to the stock.
Greene is not the only analyst giving MA some love. The shares have a unanimous analyst consensus of Strong Buy, based on 18 recent buy ratings. The average price target of $316 represents a 17% upside from the share price of $269. (See Mastercard stock analysis on TipRanks)
Visa, Inc. (V)
Visa is Mastercard’s bigger twin. Like MA, Visa no longer issues cards itself – it uses the same model of collecting royalties for branding, plus transactions fees on card use. And like Mastercard, Visa finds the model profitable. In its fiscal Q4, reported last month, Visa showed a 13% yearly gain in revenue, to $5.43 billion for the quarter, and an impressive 21% yearly gain in non-GAAP EPS, to $1.21. Quarterly net income, at $3.03 billion, was also up, gaining 6.3% from the $2.85 billion reported last year. Payment volume – the standard metric of total Visa card use – was up 9% from the year-ago quarter.
Visa’s strong growth in all metrics reflects both the increasing use of digital payments and continued high consumer confidence and spending in the US. The first factor is likely to continue supporting Visa into the indefinite future; the second is fickle, but likely to continue for the next 6 to 12 months. Even if consumer confidence declines, Visa, with over $20 billion in total revenues in the last fiscal year, and more than $10 billion in net income, has the resources to hold fast.
Those resources were Greene’s mind when he titled his recent note on Visa, “V Finishes Year on Solid Note; Provides Encouraging Outlook.” In the note, Greene pointed out that the company gave an optimistic outlook for FY2020, guiding on low-double-digit credit card revenue growth. He wrote in his bottom line, “We are highly attracted to Visa's powerful brand, vast global acceptance network and strong business model. We believe the company is well positioned to benefit from the long-term secular shift from paper currency to plastic, consumer spending growth and increased globalization.” Greene’s $202 price target on V indicates his confidence in 14% growth.
Overall, V stock gets another unanimous Strong Buy consensus rating. No less than 8 analysts have up-checked this stock in recent weeks. Shares sell for $178, and the average price target of $206 suggests an upside potential of 16%. (See Visa stock analysis on TipRanks)
With PayPal, we move away from traditional card companies into the truly digital world. This company led the way in online digital payments, and in the four years since it spun off of eBay as an independent entity, it has grown to $15.5 billion in annual revenue and more than $2 billion in net income. Looking at other metrics of success, PayPal has over 286 million active users across 202 separate markets worldwide. Customers can hold, send, or receive funds in 25 different currencies.
Like its more traditional peers, PayPal reported earnings in late October. The company showed a 195 gain in revenue, hitting $4.38 billion for the quarter, and a 25% gain in total payment volume – one of the company’s key metrics – to $178.67 billion. Both revenues and total payment volume beat the pre-earnings forecasts. PayPal’s net income for the quarter was $462 million, or 39 cents per share. The EPS was up 8% from one year ago.
Green acknowledged both PayPal’s current strong quarter and its recent headwinds in the opening of his recent note on the stock: “After a disappointing 2Q, PayPal delivered strong 3Q results as revenue grew 19%.” In his bottom line, he wrote, “PayPal has an attractive business model characterized by transaction-related fees, relatively low capital requirements, and strong free cash flow generation... We think PYPL is particularly well positioned to benefit as retail activity continues to migrate from brick-and-mortar stores toward online and mobile venues.” Greene gave PYPL a $125 price target, implying an upside of 24%.
Green is certainly not the first analyst with an optimistic outlook for the online payment giant, as TipRanks analytics showcasing PayPal stock as a Strong Buy. With an average stock-price forecast of $127.22, analysts are predicting an upside of nearly 26%. In total, the stock has received 17 'buy' ratings vs. just 4 'hold' ratings in the past three months. (See PayPal stock analysis on TipRanks)