(By Balachander) UBS upgraded rating on shares of Visa Inc. (NYSE: V) and Mastercard Inc. (NYSE: MA) to "Neutral" from "Sell".
UBS analyst John Williams said Visa upgrade follows the company's 1QFY13 earnings and its guidance reiteration.
"While (Visa) shares have underperformed YTD (+6.2% vs. the S&P 500 +9.0%), we believe intact long-term guidance, operating leverage, the dividend, capital allocation options (i.e. buybacks), and no exposure to Europe will provide a floor—despite slower global spending growth trends," the analyst wrote.
"Our view that slowing global spending growth would weigh on the model and drive modest multiple contraction has not panned out, as we underestimated investors' willingness to pay a premium multiple for the company's consistent earnings growth and L-T visibility," Williams said.
Williams has a price target of $156 on Visa stock.
The analyst said Mastercard shares have modestly underperformed YTD (+4.4% vs. the S&P 500 +9.0%) and he believes intact long-term guidance, operating leverage, a modest dividend, and capital allocation options (i.e., buybacks) will provide a floor—despite slower global spending growth.
Williams has a price target of $519 on Mastercard stock.
Visa shares rose 1.73 percent to trade at $158.11, while MA shares added 1.38 percent to trade at $520.00 on Thursday.