For Immediate Release
Chicago, IL – December 4, 2023 – 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, Discover Financial Services DFS and American Express Co. AXP.
Here are highlights from Friday’s Analyst Blog:
Reaping Rewards from Revenge Travel: Payment Firms in the Spotlight
The cross-border business is one of the most important growth drivers of payments processing companies in the post-pandemic era. This is fueled by the travel and entertainment-related transactions, which were severely impacted by the pandemic. With declining restrictions after the pandemic, domestic and cross-border travel surged by a significant margin, signaling a robust recovery in the tourism and hospitality sectors. Revenge travel quickly gained popularity as people sought to make up for lost vacations and experiences, boosting cross-border payments of financial services providers like Visa Inc. and Mastercard Inc..
Per the 2023 Visa Global Travel Intentions Study, the surge in travel post-pandemic is not showing signs of slowing down despite inflationary pressures. This is expected to continue benefiting payment companies, including American Express Co. and Discover Financial Services, as witnessed in the past few quarters.
Visa, Mastercard, American Express and Discover Financial presently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Per the Travel Price Index of the U.S. Travel Association, 73% of surveyed Americans notice an increase in travel costs; however, only 6% of travelers delay or cancel their plans. Inflation can act as a double-edged sword for digital payments companies, as higher prices of goods and services can increase the commission earned on transactions. On the flip side, high prices can result in a decline in consumer spending, leading to an overall reduction in payment volumes. However, so far, inflation has not slowed down the current pace of cross-border travel, positively impacting the results of companies in this space.
Improving travel numbers coupled with the continued adoption of electronic payments should continue to act as a boon for companies in the digital payments space. Per the 2023 McKinsey Global Payments Report, electronic or digital payments have surpassed overall payment growth, averaging at a five-year rate of 17% versus 6%. Moreover, the e-commerce uprise is also facilitating growth of digital payment companies. E-commerce global volumes are expected to grow 12-15% per year up to 2025. Growth in cross-border e-commerce is also expected to boost cross-border payment volumes.
Cross-border payments are a high-margin business, as companies can charge an additional foreign exchange fee, thus complementing its top line. Cross border Peer to Peer transactions grew at a rate of 65% year over year in the fiscal fourth quarter for Visa. Cross-border travel volume, excluding intra-Europe, year-over-year growth is expected to be near the low 20s in constant dollars in 2024 for the company.
Per the Visa Global Travel Intentions Study, digital wallets are an integral part of the travel journeys for 74% of travelers. The company is also expanding the use of Visa Direct, which proved to be an important revenue driver, marking a 19% year-over-year increase in the fourth fiscal quarter of 2023. Visa is collaborating with digital wallet companies in several countries, expanding Visa Direct’s reach to a new plethora of customers. This trend is mostly seen in unbanked countries where digital wallets are gaining traction. With Visa Direct, customers do not require a card or account to receive funds in their wallet, further enhancing its value proposition and adding to the company’s cross-border revenues.
Cross-border travel was strong for Mastercard in the third quarter of 2023 at 155% compared with 2019 levels. Both V and MA are expanding to new markets in Africa and the Middle East in an attempt to grow their footprint in those regions and leverage from resurging travel. Resurging travel in China is also expected to benefit payment services companies, as it is one of the last countries to open its borders. Cross-border travel volume for China continued on its improvement trajectory but stood below 2019 levels for Visa in the fiscal fourth quarter. Hence, growth in China tourism should reflect positively on the upcoming results of the companies.
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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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Mastercard Incorporated (MA) : Free Stock Analysis Report
Visa Inc. (V) : Free Stock Analysis Report
Discover Financial Services (DFS) : Free Stock Analysis Report
American Express Company (AXP) : Free Stock Analysis Report
