Bernstein: Visa and Mastercard - Numbers Look Good But Will It Matter?
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Bernstein maintains an Outperform rating on both Visa (V) and Mastercard (MA) ahead of their upcoming earnings releases, setting target prices of $450 and $710 respectively. Current macroeconomic indicators appear constructive, as bank earnings suggest US consumer spending accelerated by over 100 basis points in the first quarter, exceeding consensus estimates by 50 basis points. This spending resilience, supported by robust tax refunds and rising nominal consumption, acts as a tailwind for the payment networks.
However, cross-border volumes may reveal softness. The ongoing Iran conflict has disrupted Middle Eastern travel, which is expected to negatively impact first-quarter revenues by approximately 50 basis points. Conversely, Visa's recent pricing adjustments, effective in April, are projected to provide a 1 to 2 percentage point revenue tailwind in the second half of the year. Mastercard continues to navigate an approximate 60 basis point volume headwind from the Capital One-Discover debit migration, though revenue impacts remain mitigated by fulfillment obligations.
Despite highly stable fundamentals, both equities have declined 12% year-to-date. They are currently trading at rock-bottom relative valuations not seen since the Durbin Amendment or the global financial crisis, at 21x and 23x their 2027 expected earnings, respectively. Bernstein notes that these stocks have likely served as funding shorts for AI infrastructure and cyclical trades. While emerging narratives surrounding agentic commerce, stablecoins, and pending regulatory actions remain unlikely to deliver substantial short-term impacts, the long-term outlook remains highly constructive due to tokenization and value-added services.