(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.
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"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.