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The Zacks Analyst Blog Highlights: Visa, Mastercard and American Express

Zacks Equity Research
·5 min read

For Immediate Release

Chicago, IL – March 20, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Visa Inc. V, Mastercard Inc. MA and American Express Co. AXP.

Here are highlights from Thursday’s Analyst Blog:

Fall in Retail Hitting Payment Stocks, As Well

Decline in retail sales and a cutback on travel and entertainment expenditure, led by coronavirus fears, put payment stocks in complete disarray.

The latest U.S. retail sales data for February shows the steepest drop since December 2018. Retail sales in the month suffered a 0.5% dip, falling well short of expectations and suggesting consumers’ suppressed appetite for spending on heavy purchases like vehicles and electronics due to coronavirus concerns.

Industry experts are seeing more pain ahead a consumers are restricting their buying capacity to only essential items amid the deadly viral outbreak and avoiding public places like restaurants, theaters and malls in the hour of social distancing.

The travel and entertainment industry has already taken a huge hit following travel restrictions and canceled business as well as pleasure trips.

Given that payment for purchases and other spending are increasingly being made by alternative modes other than cash, such as debit/credit cards, online, mobile, wearables, etc., payments stocks like Visa Inc., Mastercard Inc. are incurring huge business losses.

Payment processor giants Mastercard and Visa generate bulk of their earnings from fees collected in processing total transactions through their strong ecosystem. However, under the current circumstances, these stocks are witnessing a massive volume erosion in transactions processed.

Nevertheless, a surge in online sales comes as a huge relief to these companies as people more inclined toward e-shopping tend to avoid going to stores nowadays. Sales at non-store retailers for February inched up 0.7% from the previous month’s level.

Industry experts and retailers observe that the impact of the COVID-19 pandemic on the ecommerce market is dubious as online sales for essential products may spike while sales for non-essential items may slip. With consumers dodging brick-and-mortar shops and many retailers temporarily shutteringphysical outlets, more consumers may shop online.

Despite an increase in non-store sales it must be noted that in February, nonstore sales mirrored less than a quarter — just 21.8% — of all retail gains excluding the estimated sales of fuel. This segment typically accounts for about half or even two-thirds of spending gains across all channels. This, in turn, reflects a descent in non-store sales during February.

Major players in the industry slashed their near term earnings guidance. American Express Co., which provides its cards to offer premium and luxury services at airport lounges and concierge services, is witnessing weakness in its card usage due to a considerable decline in T&E spending and dented cross-border volumes across all its geographies. The company updated its near-term outlook after reckoning the potential impact of the COVID-19. It now expects first-quarter adjusted EPS in the range of $1.9-$2.1 and revenue growth of 2-4%.

Both Visa and Mastercard issued intra-quarter updates in recent weeks, detailing their expected top-line headwinds from the COVID-19 effect. Visa anticipated a 250-350 bps top-line adversity relative to the prior guidance while Mastercard noted a 200-300 bps headwind relative to its past outlook.

Overall billing volumes for payment stocks will continue to remain subdued with several events getting cancelled and consumers averting mass gathering. As long as COVID-19 fears persist, these stocks will buckle under pressure.

Though the payments space is set to grow on the back of its continued shift toward digitalization and consumers’ preference to opt for a fast-paced payment mode, stocks like Visa, Mastercard, American Express have a long way to go before complete recovery. However, near-term hicupps cannot be ignored.

American Express, Mastercard and Visa have declined 40.7%, 23.7% and 20.9%%, respectively, compared with the industry’s decrease of 25%.

Each stock carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Zacks Investment Research

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


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American Express Company (AXP) : Free Stock Analysis Report
 
Mastercard Incorporated (MA) : Free Stock Analysis Report
 
Visa Inc. (V) : Free Stock Analysis Report
 
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