American Express Could Hit 140 in the Fourth Quarter

Dow component American Express Co. (AXP) is trading marginally higher in Thursday’s pre-market after Bank of America Securities upgraded the stock from ‘Underperform’ to ‘Neutral’, posting a $169 price target.  The ratings change matches recent actions by Seaport Global Securities and Credit Suisse Group, highlighting analyst caution after the financial technology provider gained nearly 270% off the March 2020 low.

Delta Variant Stalls Business Travel Plans

The stock is highly levered to business and travel spending that’s been impacted by the COVID-19 pandemic. The growth outlook looked bright at the end of the first quarter but the Delta variant has forced corporations to delay plans to reinstitute airline travel, having a negative impact on airline, hotel, conference, and food transactions. That headwind has also impacted rivals Visa Inc. (V) and Mastercard Inc. (MA), with the trio pulling back from summer peaks.

American Express released solid August card metrics on Wednesday, reporting a U.S. Consumer Card Member net loan write-off rate of 0.6% vs. 0.7% in the prior month, or a -10 bps change. Consumer loans 30 days or more past due stood at 0.6% vs 0.6% in the prior month, marking no change, while the U.S. Small Business Card member loan net write-off rate of 0.5% matched 0.5% in July. Loans that were 30 days or more past due rose slightly to 0.5%, compared to 0.4%.

Wall Street and Technical Outlook

Wall Street consensus now stands at an ‘Overweight’ rating based upon 12 ‘Buy’, 1 ‘Overweight’, 13 ‘Hold’, 2 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $140 to a Street-high $227 while the stock is set to open Thursday’s session about $23 below the median $185 target. This low placement should favor a strong fourth quarter bounce but technical factors are telling a more bearish tale.

American Express topped out at 138 in January 2020 and sold off to a four-year low during the pandemic decline. The subsequent uptick reached the prior peak in February 2021, triggering an immediate breakout that posted an all-time high at 179.67 in July. A steady downtick since that time has flipped weekly and monthly Stochastics into sell cycles, predicting continued weakness that could reach 200-day moving average support near 150 in coming weeks.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held Visa in a family account at the time of publication. 

Mike Novogratz Says Bitcoin and S&P 500 Likely to ‘Drive On’

The bitcoin price is taking a bit of a breather, having retreated slightly below the USD 50K level once again. According to one market expert, however, even if there is a pullback, you might not want to bet against the markets just yet. That goes not just for crypto but stocks too.

Mike Novogratz, who is at the helm of Galaxy Digital, in an interview with CNBC described how the bitcoin market has momentum on its side. In the short term, don’t be surprised to see prices stabilize and consolidate, he noted, adding that prices “don’t keep going up forever.” Though they are on pace to go up for the year.

For the latest quarter, the cryptocurrency market, as well as the S&P 500, have been on fire. According to Novogratz, winners of the year with such a jump start will usually just “drive on.”

In fact, he does not see a reason not to be long stocks here. Valuations might be lofty, but given the pace of share buybacks and the Fed’s money train, investors can expect stocks to be resilient.

Paradigm Shift

It wasn’t too long ago that the bitcoin price was trading in the doldrums and hovering at about the USD 30K level. Ethereum, the second-biggest cryptocurrency, was trending lower too. A paradigm shift happened, however, that has put the fuel back into crypto prices.

Major companies including the likes of Amazon and Walmart are on the hunt for blockchain talent. Visa just doled out USD 150K in Ethereum for its very first non-fungible token (NFT) — a Crypto Punk digital avatar. From the sounds of it, this NFT might not be Visa’s last.

In addition, the cryptocurrency industry gave lawmakers a wake-up call in Washington, D.C. with such an organized response in reaction to a shortsighted infrastructure bill that takes aim at crypto. Novogratz said,

“We became an industry in D.C.’s eyes,” calling it a “huge shift.”

Novogratz on NFTs

Novogratz is quick to point out that there is froth in the NFT market as prices continue to go up into the stratosphere. EtherRocks, a project comprising a collection of jpeg clip art, are the latest example of this. Tron founder Justin Sun, for example, forked about USD 600K for an EtherRock NFT. Another EtherRock went for more than USD 1 million this week.

NFTs are capturing more and more of the total art industry sales, which for such a nascent market is making a statement. According to Novogratz, that statement is that NFTs represent a shift in culture, which according to him is a big, big deal.

A Profit Warning Knocks PayPal Down Like a Rock

PayPal Holdings Inc. (PYPL), one of 2020’s hottest stocks, is trading lower by more than 9% in Thursday’s pre-market after issuing downside profit guidance for the third quarter and full year. The digital payments juggernaut beat Q2 earnings-per share (EPS) estimates by just $0.03, posting a profit of $1.16, while revenue rose 18.6% year-over-year to $6.24 billion, just missing $6.27 billion consensus. Total payment volume during the quarter grew 40%, or 36% on a currency neutral basis.

Pandemic Hangover

The company boasts a 55.7 price-to-earnings ratio (P/E), higher than American Express Co. (AXP) but on par with Visa Inc. (V) and MasterCard Inc. (MA). The weak outlook exposes vulnerability to a pandemic ‘hangover’ that many 2020 beneficiaries have reported in their quarterly results. Simply stated, the rapid transition into digital payments, streaming services, and at-home food delivery yielded a one-time cash influx that’s now reverting to historical performance.

The selloff comes just three business days before PayPal raises rates for many merchant accounts. Originally announced in June, the news triggered a strong rally into July but Q3 and full year profit warnings suggest the company miscalculated and now expects to lose customers. It may also have underestimated the growing number of choices in the digital payment space, heralding an era in which it will need to compete more forcefully for market share.

Wall Street and Technical Outlook

Wall Street has been wildly bullish on PayPal for months, holding like glue to a ‘Buy’ rating now based upon 35 ‘Buy’, 5 ‘Overweight’, 6 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $250 to a Street-high $375 while the stock is set to open Thursday’s session more than $50 below the median $330 target. A quick uptick into the median price seems unlikely, given weak guidance, because it would require breaking out to a new high.

PayPal posted a phenomenal 219% return in 2020 and continued to book upside into the February 2021 high at 309.14. A decline into March found support in the 220s while the bounce into July mounted the first quarter peak by less than one point ahead of this morning’s selloff. The reversal reinforces resistance above 300 while setting up a test of 50-day moving average support at 285. A breakdown is possible given downside momentum, exposing an unpleasant trip to the March low.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Visa’s Latest Figures Show Cryptocurrency Adoption Is Rising

The adoption gained by cryptocurrencies this year is unmatched. It has shown in various ways that adoption is on the rise, and Visa has confirmed it with exciting data. Over the past six months, cryptocurrency-linked card usage on the payment network has surpassed the $1 billion mark.

More People Are Spending Crypto With Cards

Payment giant Visa revealed yesterday that over $1 billion worth of cryptocurrencies was spent on their network in the first half of 2021. The figure surpasses those recorded in 2019 and 2020.

Visa CFO Vasant Prabhu told CNBC that the use of cryptocurrencies has gone up massively in recent months. During the interview, the CFO said more people are experiencing ways they can use cryptocurrencies to pay for goods and services. Similar to how they use fiat currencies. He pointed out that there are numerous issues regarding cryptocurrency’s volatility but maintains that the problem is for the owners to manage and track.

The CFO said, “We are doing a lot to create an ecosystem that makes cryptocurrency more usable and more like any other currency.”

More People Are Interested In Cryptocurrencies

The data is an interesting one, especially at a time when the prices are down. A recent study by MasterCard revealed that over 93% of North Americans intend to use cryptocurrencies or other emerging payment options to pay for goods and services in the next year.

The adoption of cryptocurrencies is being felt by Visa. The CFO said their network is experiencing an increasing number of people using their Visa debit and credit cards to purchase cryptocurrencies on regulated exchanges. He added that he believes the trend will continue for a long time.

BTC/USD chart. Source: FXEMPIRE

Cryptocurrencies have been in a bearish trend over the past two months. Bitcoin has been struggling to surpass the $35k region and mount a rally towards the $40k level. Despite the massive decrease in the prices of most cryptocurrencies, more people are entering the market as they believe the assets allow them to hedge their wealth and grow it.

Visa Set to Reward Shareholders

Dow component Visa Inc. (V) is trading just five points below April’s all-time high after bullish Credit Suisse commentary. The financial giant has risen about 7% so far in 2021 but could add substantially to those gains as international locations get vaccinated and open their borders to travelers.  U.S. citizens alone could add significantly to payment volumes, with baby boomer accounts stuffed with discretionary capital earmarked for foreign destinations.

Slow International Recovery

The stock had a mixed 2020, booking an 11.7% return, but added just four points to the February 2020 peak by year’s end. It benefited from the rapid transition out of paper currency and into digital assets when the pandemic struck but transaction volumes still haven’t returned to 2019 levels. Americans are doing their part, with 2021 GDP surging above 6%, but the slow recovery in Europe and parts of Asia continue to weigh on investor sentiment.

Credit Suisse analyst Moshe Orenbuch raised his target to $285 on Tuesday, noting “Visa provided updated business metrics through May 31st, highlighted by cross-border ex-intra Europe improving to 85% of 2019 levels in May. This 600bps improvement compares to a guide that implies only 200-300bps of improvement for the entire quarter. In our view, Visa’s cross-border recovery highlights our stance that cross-border revenue can begin to surpass 2019 levels far before we reach a full recovery in travel.”

Wall Street and Technical Outlook

Wall Street consensus rates Visa as a ‘Buy’ based upon 28 ‘Buy’, 6 ‘Overweight’, 4 ‘Hold’, and 1 ‘Underweight’ recommendation. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $238 to a Street-high $297 while the stock opened Wednesday’s session about $6 below the low target. This depressed placement suggests major upside but solid metrics will be needed to overcome investor caution.

A strong uptrend topped out near 215 in February 2020, giving way to a steep slide, followed by a vertical recovery wave that stalled in September after completing a 100% retracement into the first quarter peak. Visa has spent the rest of the year and first two quarters of 2021 grinding sideways to higher in a shallow trajectory. Weak accumulation since November 2020 highlights investor caution that should dissipate once enough jabs hit European and Asian arms.

For a look at all this week’s economic events, check out our economic calendar.

Disclosure: the author held Visa in a family account at the time of publication.

Time for Silver-Backed Crypto?

Its market recently exceeded $1 trillion. That’s a long way from its humble beginnings shortly after the 2008-2009 financial crisis.

Bitcoin will keep facing challenges as some governments disparage and regulate it, while others try bans of one form or another.

I doubt that will meet with much success. Big name money managers and high-profile tech entrepreneurs have gotten on board, many reversing their earlier doubts.

Bitcoin is decentralized, the blockchain is verified by over 100,000 independent nodes globally, and it has a hard limit supply of 21 million coins. Other cryptos and central banks may want in on this sector, but there will only ever be one Bitcoin.

Still, I think precious metals-backed cryptos could become serious contenders in the digital currency revolution, as the world looks for the security of safe havens with the convenience of crypto.

Crypto De-Fi Revolution

Bitcoin has come a long way. Today, it’s gained not only the acceptance of big-name investors like Paul Tudor Jones, Ray Dalio and Elon Musk, it’s been integrated by a number of well-established payment systems. MassMutual, a 170-year old insurance behemoth, bought $100 million worth of bitcoin last December. In February, Tesla announced it had bought $1.5 billion worth.

And crypto as a sector is exploding. PayPal recently said it was investing heavily into a new business unit aimed exclusively at cryptocurrencies. Their idea is to facilitate cryptocurrency payments across PayPal’s network, and this by the end of 2021. It’s all part of a burgeoning trend called decentralized finance, or DeFi.

Remember, there are an incredible 29 million merchants who use Paypal, meaning they will be able to accept cryptocurrency payments through that network. In fact to simplify things, PayPal will automatically convert the crypto payment into the national currency of the merchant.

The big advantage for merchants is the speed of transaction clearing. Credit card and bank payments typically take 24 hours or longer to settle. With crypto that will happen within seconds or minutes, allowing merchants to access their funds much sooner.

Just recently, Visa announced it would allow customers to use the USD Coin cryptocurrency to settle transactions on its network. USD Coin is a “stablecoin cryptocurrency” whose value is pegged to the U.S. dollar. This follows on the heels of Mastercard, BlackRock and BNY Mellon all confirming they would be facilitating crypto transactions for investments and payments.

Despite all this, some challenges remain.

Central Bank Digital Currencies

Many people can’t get past the idea that there’s nothing physical backing Bitcoin. And if you have no electricity you can’t get at your crypto.

The fact that nothing’s backing most cryptos is not that different from the currency we use today. It has value because central banks say so and people accept it. So that’s not the biggest hurdle. However, if there is a large and extended power outage, then there’s a real problem as crypto has to be accessed on a computer, tablet, or smartphone.

But these hurdles haven’t stopped numerous central banks from researching and implementing digital currencies. As the following chart shows, central banks around the world have been busy developing their own CBDCs (central bank digital currencies).

Over 60 central banks are currently working on this, so CBDCs are soon coming to a country near you.

These are not the same as cryptocurrencies. Central banks love the idea of eliminating cash. That’s because it allows them to track every dollar or other currency unit they create. That way they know who spends how much, when, where and on what.

The level of control that will ultimately give them will be unmatched. And the COVID-19 pandemic has massively accelerated this trend.

There are over 400 million people in China and India without a bank account. “Unbanked” people would have easier access to tax refunds or stimulus checks. China is pushing hard and fast towards making itself into a “cashless” society. It’s planning to make the 2022 Beijing Winter Olympics a completely cash-free event.

Don’t think the U.S. is willing to be left behind. This past February, Fed Chair Jerome Powell said a digital USD is a “high-priority project…We are looking very carefully, very carefully, at the question of whether we should issue a digital dollar.” Around the same time, Treasury Secretary Janet Yellen told the New York Times, “It makes sense for central banks to be looking at” CBDCs, adding that “too many Americans don’t have access to easy payments systems and banking accounts, and I think this is something that a digital dollar, a central bank digital currency, could help with.”

CBDCs can be created and distributed much more easily and quickly than existing currencies. This is a major problem in my view (think inflation), but it’s a major advantage if you’re a central planner.

Already the world has reached an astounding $281 trillion in total global debt, or more than 355% of world GDP. If CBDCs are adopted, I expect they will hasten this trend. Eventually, the entire financial system is likely to need a total reset.

Precious Metals Backed Crypto

I believe precious metals will have a major role to play. Even if I’m wrong on that point, they will still likely soar as inflation hedges.

In fact, I think that ultimately we may have a gold and/or silver backed crypto currency that is government mandated, once faith in fiat currencies is completely lost and a reset is required. That new currency will have both intrinsic value and the conveniences of crypto. And if that currency is on a blockchain which logs all transactions, then it can be very secure.

There are already several cryptos backed by precious metals or that are in the development stages. One of the biggest advantages of this approach to owning precious metals is that it allows ownership of small amounts, without dealing with storage issues, while offering security and the ability to easily and quickly transfer value to someone else.

Here are a few companies that are active in this space. For example, Aurus (https://aurus.io/) has built a platform allowing refineries, distributors and vaults to autonomously tokenise precious metals. There are other similar developments:

  • deVere Group has the Pax Gold crypto, which is backed by a portion of a London Good Delivery gold bar
  • Dignity Gold company has secured $6 billion in gold from mining claims in Nevada and Arizona for its DIGau digital token
  • Lode (https://lode.one/) has the AUX Coin which represents 1 milligram of vaulted, audited, insured and verifiable gold bullion, and the AGX Coin is 1 gram of silver

(Note: I provide the above for informational purposes only. I am not endorsing any of these companies).

Even if precious metals backed cryptocurrencies don’t replace CBDCs, they are very interesting as they may go a long way to solving the problems of storage, security and rapid transferability.

This is certainly an area of precious metals to watch closely. People may well gravitate towards this as they seek a highly practical store of value, based on one of the oldest forms of real money: gold and silver.

One thing is certain; precious metals are in the early days of a massive bull market. That’s why in the Silver Stock Investor newsletter I provide my outlook on which silver stocks have the best prospects as this bull market progresses. Many offer 5x to 10x return potential in just the next few years, especially as silver heats up.

And crypto may be the next major source of demand for precious metals, helping to push silver and gold much higher in the future.

For a look at all of today’s economic events, check out our economic calendar.

PayPal Shares Trade Flat Despite Launching Crypto Payments

PayPal Holdings, Inc. (PYPL) edged 0.37% higher Wednesday after the digital payments company launched its highly anticipated cryptocurrency checkout service.

U.S. customers who hold leading digital currencies Bitcoin, Ethereum, Bitcoin Cash, and Litecoin in their PayPal wallet will now be able to convert holdings into fiat currencies at participating merchants to make purchases. “This is the first time you can seamlessly use cryptocurrencies in the same way as a credit card or a debit card inside your PayPal wallet,” CEO Dan Schulman told Reuters.

The company, which plans a full rollout across its 29 million merchants within the coming months, first announced its foray into digital currencies late last year, initially only allowing users to buy, hold, and sell leading cryptocurrencies. The latest development comes within the same week that Tesla, Inc. (TSLA) CEO Elon Musk said U.S. customers can now purchase Tesla cars with Bitcoin and rival Visa Inc. (V) announcing that it facilitates settling transactions in USD Coin (USDC) – a stable coin backed by the U.S. dollar.

Through Wednesday’s close, PayPal stock has a market value of $277 billion and trades mostly flat since the start of the year. However, the shares have gained around 145% over the past 12 months. Valuation-wise, the stock looks a little pricey, trading 53% above its five-year average forward earnings multiple of 34 times.

Wall Street View

In January, BTIG analyst Mark Palmer upgraded PayPal to ‘Buy’ from ‘Neutral’ and placed a $300 price target on the shares. Palmer told clients that PayPal’s crypto initiative could add more than $1 billion to PayPal’s annual revenues in 2022. The analyst also argues that a shift to digital payments during the pandemic should continue in 2021 and propel the payment processer’s long-term growth trajectory.

Sentiment elsewhere on Wall Street remains bullish. The stock receives 35 ‘Buy’ ratings, 5 ‘Overweight’ ratings, and 7 ‘Hold’ ratings. Just one sell-side analyst recommends selling the shares. Twelve-month price targets range between $241 and $375, with the median pegged at $310.

Technical Outlook and Trading Tactics

Despite most analysts expecting further upside, the PayPal chart indicates short-term weakness that could see the shares fall. Over the first three months of the year, the stock has formed a head and shoulders pattern – a formation that often signals a top.

Active traders would be better to look for buying opportunities near $212.5, where the price finds a confluence of support from a multi-month horizontal trendline and the rising 200-day simple moving average (SMA). Those who buy at this level should target a move back up to the pattern’s head at $309.14. Protect capital with a stop-loss order placed below the psychological $200 level.

For a look at today’s earnings schedule, check out our earnings calendar.

Mastercard, Rivals ‘Ran Cartel’ on Cards for the Vulnerable, UK Watchdog Says

Mastercard, allpay, APS, PFS and Sulion agreed not to compete or poach each other’s customers on cards used by local authorities for welfare payments to the homeless, victims of domestic violence and asylum seekers, the PSR said.

The investigation is ongoing and the companies can make representations on the provisional findings, the PSR said.

Mastercard, allpay and PFS have admitted liability and if the regulator ultimately concludes there is wrongdoing have agreed to pay maximum fines totalling more than 32 million pounds ($44 million), the watchdog said.

The PSR alleges two infringements of Britain’s 1998 competition law.

One breach took place over six years between 2012 and 2018 and involved all five firms, the PSR said.

The other lasted between 2014 and 2016 and involved APS and FPS, the watchdog said.

“Pre-paid card services, like these, can provide significant benefits to local authorities as one way to make welfare payments to some of the most vulnerable people in society,” said Chris Hemsley, managing director of the PSR.

“By colluding in this way, we consider the parties were acting as a cartel… Collusion in payments is absolutely unacceptable. Where we see it happening, we will take action, stop it, and seek to impose significant penalties.”

Mastercard, allpay, APS and PFS were not immediately available for comment. Sulion could not be reached.

(Reporting by Iain Withers; editing by Rachel Armstrong and Jason Neely)

Visa to Settle Transactions in USDC, Preps for CBDCs

Global payments giant Visa announced that it would accept stablecoin USD Coin to settle transactions on its network, which is another big step towards wider adoption of cryptocurrencies.

Visa noted that it was only the start of the journey, and one day it may support Central Bank Digital Currencies (CBDCs) when they become available.

Visa Shares “Some Historic News”

Several years ago, when some major banks or fintechs, such as Morgan Stanley or Barclays, launched blockchain trials, most of them made sure to explicitly detach their blockchain efforts from the crypto industry. Today, Visa presents its cryptocurrency adoption plan as “some historic news,” which is another demonstration that digital assets are not only a marginal phenomenon anymore.

On Monday, Visa said that it executed the first transactions settled in USDC – a stablecoin launched in 2018 by Coinbase and Circle. It is pegged to the US dollar with a 1:1 ratio. Currently, it is the 12th largest cryptocurrency by market and is the most dominant stablecoin in Decentralized Finance (DeFi), which has been the fastest-growing sector within the crypto space.

Visa is collaborating with Crypto.com, a cryptocurrency exchange and payment platform that provides Visa cards to its users. Visa said it would make its option accessible to more partners by the end of this year.

Cuy Sheffield, head of crypto at Visa, commented:

We see increasing demand from consumers across the world to be able to access, hold and use digital currencies and we’re seeing demand from our clients to be able to build products that provide that access for consumers.”

Thus, users of Visa-backed crypto cards will be able to use digital currencies to pay at merchants and the transactions will be settled in USDC on blockchain. Previously, if a client used Crypto.com’s Visa card to pay at a merchant, the cryptocurrency held in the digital wallet had to be converted into fiat money.

To build the infrastructure, Visa partnered with Anchorage, which is the first US federally charted digital asset bank. Visa uses Anchorage’s custody platform.

Stablecoins Will Continue to Play a Major Role

Visa’s move demonstrates once again that stablecoins are poised to play a major role, as they act as a bridge between traditional finance and the crypto world. USDT, the oldest stablecoin, is currently the third-largest cryptocurrency after Bitcoin and Ethereum, which reflects the huge demand for digital assets with fixed prices.

Visa selected USDC after analyzing stablecoins based on three main criteria: demand, stability, and security.

The payment giant noted that one day it might support CBDCs when they become available.

Visa Rallies to All-Time High

Dow component Visa Inc. (V) rallied to an all-time high on Monday, underpinned by the repeal of COVID mandates all across the U.S. ‘Red State’ universe. Texas started the ball rolling when Gov. Abbott lifted mask and capacity restrictions, quickly followed by similar pronouncements in Mississippi, Alabama, and West Virginia. Other states run by Republican governors have followed suit or partially lifted restrictions while maintaining mandates that are now widely ignored.

Rapid Economic Expansion

Taken together with the rapid expansion of U.S. vaccinations, the nation appears at the brink of a dramatic economic surge that could take the rest of the world by surprise. The bond market has picked up on this bullish development, lifting yields to multiyear highs. Increased spending will add substantially to Visa revenue, raising odds for a strong uptrend that posts impressive 2021 returns.

The company benefited from the pandemic’s forced change in financial transactions, with contactless payment systems emerging as a major force. However, Visa and rival Mastercard Inc. (MA) revenues are highly levered to payment volume, which fell precipitously in the first quarter of 2020, and has recovered at a measured pace. In reaction, rallies in both stocks faltered after strong bounces, yielding mediocre 2020 returns.

Wall Street and Technical Outlook

Wall Street consensus has lifted to a ‘Buy’ rating based upon 29 ‘Buy’, 4 ‘Overweight’, 6 ‘Hold’, and 1 ‘Underweight’ recommendation. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $216 to a Street-high $270 while the stock is set to open Tuesday’s U.S. session about $4 below the low target. This divergence with price action could underpin a strong multi-month uptrend.

The stock posted exceptionally strong gains between 2017 and the first quarter of 2020, topping out at 214.17. It shed 80 points during the pandemic decline and turned sharply higher, completing a round trip into the prior peak in August. Nominally higher highs since that time have carved rising wedge resistance, which narrowly aligned with Visa’s closing print on Monday. In turn, a rally above the weekly peak at 226.13 is now needed to confirm a breakout and uptrend that could reach 300 later this year.

For a look at all this week’s economic events, check out our economic calendar.

Disclosure: the author held Visa in a family account at the time of publication.

Visa Tops Q1 Earnings Estimates; Shares Gain on Buyback Plan

Visa Inc, the world’s largest card payment company, reported better-than-expected profit in the first quarter of 2021 as payments volume, cross-border volume and processed transactions growth recovered from the previous quarter.

The global technology payment company said its net income dipped to $3.13 billion, or $1.42 a share, down from $3.27 billion, or $1.46 a share a year earlier. On an adjusted basis, Visa reported a profit of $1.42 per share, down from $1.46 seen in the same period a year ago. However, that higher than the market consensus estimates of $1.28 per share.

Visa’s total revenue came in at $5.69 billion, down from $6.05 billion a year earlier but that was better than the Wall Street estimate of $5.52 billion.

Visa’s (V) F1Q results came in ahead of our estimates/consensus, with key metrics improving sequentially. In January processed transactions and cross-border volumes remained stable, while US payment volumes continued to improve led by debit. That said, many countries ROW experienced a slowdown in cc payment volume. While we are lowering our F2Qrevenue estimate, we are still forecasting a 2H21 rebound,” said George Mihalos, equity analyst at Cowen and Company.

The company also authorized a new $8.0 billion share repurchase program, bringing total funds available for share repurchase to over $11 billion.

That helped Visa shares to rise as high as 2% in extended trading on Thursday; the stock surged above 16% in 2020.

Visa Stock Price Forecast

Twenty-two analysts who offered stock ratings for Visa in the last three months forecast the average price in 12 months at $235.95 with a high forecast of $270.00 and a low forecast of $204.00.

The average price target represents a 19.03% increase from the last price of $198.22. From those 22 analysts, 19 rated “Buy”, three rated “Hold”, and none rate “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $233 with a high of $258 under a bull scenario and $148 under the worst-case scenario. The firm currently has an “Overweight” rating on the payment company’s stock.

Several other analysts have also recently commented on the stock. Cowen and company raised the target price to $226 from $221. Credit Suisse upped the price objective to $265 from $255. Compass Point increased the stock price forecast to $240 from $230. Keybanc lowered the target price to $210 from $225. Citigroup raised the price target to $239 from $230.

Analyst Comments

Visa (V) is one of our preferred stocks, as it is a key beneficiary of resilient global consumer spend growth, the ongoing shift from cash to electronic payments, and broadening merchant acceptance. Global Personal Consumption Expenditure and secular growth drivers should support low double-digit revenue growth in the near-to-medium term,” said Michael Cyprys, equity analyst at Morgan Stanley.

“While COVID-19 headwinds are likely to persist, we see upside opportunity from the faster-than-expected recovery of travel. Continued investment in longer-term initiatives (faster payments, P2P, B2B) and partnerships continue to increase its TAM and offer an opportunity for compounding double-digit earnings growth for the foreseeable future.”

Check out FX Empire’s earnings calendar

Biden’s Presidency from a Market Perspective

Chief Market Analyst of XTB group discusses Biden’s presidency from a market perspective.

Watch this video to learn:

  • Key themes of Joe Biden’s presidency
  • Chances and risks for the markets
  • Present market situation on indices, fx and commodities
  • Key calendar positions for this week

Other top news this week include:

Earnings to Watch Next Week: Microsoft, Apple, Tesla and Facebook in Focus

Earnings Calendar For The Week Of January 25

Monday (January 25)

IN THE SPOTLIGHT: KIMBERLY-CLARK

Kimberly-Clark, an American multinational personal care corporation, is expected to report a profit of $1.62 in the fourth quarter of 2020, which represents a year-over-year decline of about 5.2% from the same quarter a year ago when the company reported $1.71 cents per share.

However, Wall Street forecasts the company’s revenue to grow over 3% to $4.7 from the same period year ago. For full-year 2020, revenue is expected to be at $19.1 billion.

“We maintain our Buy-rating and above-consensus EPS estimate into KMB’s 4Q report BMO on Monday. Kimberly Clark’s (KMB) shares have lagged staples as the market remains concerned about moderating POS trends in Dec/Jan and commodities; however, we see an upside to Street 4Q20 and ’21/’22 ests. w/commodity inflation reasonably reflected at current spots and view the bar as low into the print w/KMB trading at 16x P/E (30% discount to HPC peers vs. 20% hist. avg.),” noted Kevin Grundy, equity analyst at Jefferies, who rated the paper products giant “Buy” and set the price target at $152.

Florida-based insurance broker Brown & Brown will post earnings of $0.29 per share for last quarter of 2020.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 25

Ticker Company EPS Forecast
CBU Community Bank System $0.76
BOH Bank of Hawaii $1.11
PHG Koninklijke Philips $1.04
KMB Kimberly Clark $1.62
WSFS Wsfs Financial $0.91
AUY Yamana Gold USA $0.11
CR Crane $1.10
HXL Hexcel -$0.20
BXS BancorpSouth $0.62
JJSF J&J Snack Foods $0.26
SFBS ServisFirst Bancshares $0.81
BRO Brown & Brown $0.29
GGG Graco $0.51
AGNC American Capital Agency $0.65
STLD Steel Dynamics $0.76
FUL HB Fuller $0.85
ACKAY Arcelik ADR $0.61
ASH Ashland $0.44
ELS Equity Lifestyle Properties $0.33
BKRKY Bank Rakyat $0.17

Tuesday (January 26)

IN THE SPOTLIGHT: MICROSOFT

MICROSOFT: The global technology giant is expected to report a profit of $1.64 in the fiscal second quarter, which represents year-over-year growth of about 8.6% from the same quarter last year when the company reported $1.51 per share.

The world’s largest software maker’s revenue is forecasts come at $40.23, up from the $36.91 billion reported the same quarter a year earlier.

“Q2 results likely highlight the durability of Microsoft‘s commercial businesses and conservatism in forward consensus expectations. After clearing tough Q2 product cycle comps and lingering COVID-19 impacts, strong secular positioning and an attractive multiple make Microsoft (MSFT) a top stock for the recovery,” said Keith Weiss, equity analyst at Morgan Stanley.

“At 26x CY22e GAAP EPS, MSFT trades at a premium to the S&P, warranted due to MSFT‘s premium return profile. Multiple expansion will likely come from gaining comfort in the durability of commercial business gross profit dollars.”

Johnson & Johnson, one of the world’s largest and most comprehensive manufacturers of healthcare products, will post earnings of $1.83 per share for last quarter of 2020.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 26

Ticker Company EPS Forecast
NEE NextEra Energy $0.38
NEP Nextera Energy Partners $0.37
JNJ Johnson & Johnson $1.83
NVS Novartis $1.36
RTX Raytheon Technologies Corp $0.69
GE General Electric $0.09
AXP American Express $1.31
LMT Lockheed Martin $6.42
MMM 3M $2.15
PLD ProLogis $0.39
FCX Freeport-McMoran $0.38
PCAR PACCAR $1.21
ROK Rockwell Automation $1.89
DHI DR Horton $1.68
WAT Waters $2.87
IVZ Invesco $0.57
ALV Autoliv $1.92
PII Polaris Industries $2.90
ALK Alaska Air -$2.86
SNV Synovus Financial $0.81
PPBI Pacific Premier Bancorp $0.56
GATX GATX Corp $0.87
SFNC Simmons First National $0.42
XRX Xerox $0.63
CIT CIT $0.57
ADM Archer-Daniels Midland $1.10
RNST Renasant $0.59
MSFT Microsoft $1.64
TXN Texas Instruments $1.34
SBUX Starbucks $0.56
AMD Advanced Micro Devices $0.47
CNI Canadian National Railway USA $1.42
COF Capital One Financial $2.80
MXIM Maxim Integrated Products $0.68
VAR Varian Medical Systems $1.05
BXP Boston Properties $0.60
CHRW C.H. Robinson Worldwide $0.97
FFIV F5 Networks $2.44
WRB W.R. Berkley $0.79
EHC Encompass Health Corp $0.85
RNR Renaissancere -$1.92
SLGN Silgan $0.53
UMBF UMB Financial $1.32
NAVI Navient $0.83
WSBC WesBanco $0.61
FMBI First Midwest Bancorp $0.26
RXN Rexnord $0.38
EBAY eBay $0.84
HOG Harley Davidson $0.10

Wednesday (January 27)

IN THE SPOTLIGHT: APPLE, TESLA, FACEBOOK

APPLE: The consumer electronics giant is expected to report profit growth of more than 12% of $1.41 in the fiscal first quarter of 2021 on sales of $102.61 billion, highlighted growth of over 11% from the year-ago quarter. That growth is largely driven by a strong demand iPhone handset, Mac computers, iPad tablets and wearables in the holiday season.

“Our December quarter revenue of $108.2B is 5% above consensus, while our EPS of $1.50 is 7% above consensus. We expect demand strength to continue and our FY21 revenue and EPS estimates are both 5% above consensus,” wrote Katy Huberty, equity analyst at Morgan Stanley.

“Given positioning into the quarter is muted after the rotation out of high-quality stocks over the past several months, we expect strong follow-through post-earnings and are buyers into the print. We also raise our price target to $152, from $144, as we mark our price target to market accounting for recent peer multiple expansion.”

TESLA: The California-based electric vehicle and clean energy company is expected to report a profit of $1.04 in the fourth quarter of 2020, posting a profit for the sixth straight quarter. The manufacturer of high-performance electric vehicles’ revenue is forecast to surge about 35% to $10 billion.

“A double-fly-wheel. We believe Tesla can leverage its cost leadership in EVs to aggressively expand its user base, over time generating a higher % of revenue from recurring/high-margin services revenue. Services drive the upside. We forecast Tesla’s (TSLA) network services EBITDA as a % of total TSLA EBITDA to reach 11% by 2025, 19% by 2030 and 37% by 2040. Tesla Service revenue includes automated driving, infotainment, upgrades, supercharging, maintenance, telematics, etc.,” said Adam Jonas, equity analyst at Morgan Stanley.

“Valuation supportive vs. tech. Including Network Services, Energy & Insurance to our core auto forecasts, at $810 Tesla trades at 25x EV/EBITDA in 2025 and 5x 2025 sales. Expensive vs. auto but not vs. software/tech comps.”

FACEBOOK: The world’s largest online social network is expected to report a profit of $3.16 in the fourth quarter of 2020, which represents year-over-year growth of 23.4% from the same quarter a year ago when the company reported $2.56 cents per share.

According to the Zacks Research, the social media conglomerate’s revenue will increase of 24.7% to $26.29 billion from the year-ago, largely driven by solid ad-revenue growth amid advertiser demand during the holiday period.

“Monetization Potential: We are positive on FB‘s monetization roll-out of Instagram as well as FB’s ability to continue to innovate and improve its monetization (Canvas Ads, Dynamic Ads, video). Combined with the high and growing engagement we see monetization upside going forward,” noted Brian Nowak, equity analyst at Morgan Stanley.

“Investing from Position of Strength to Drive Faster Long-Term Growth: We are modeling 29% GAAP opex (excl. one-time items) growth in 2021, implying an incremental $15bn in opex. Our base case model implies opex per employee moderates in ’21 while FB hiring remains roughly flat on an absolute basis. We believe FB will grow EPS at a 28% CAGR (2019-2022).”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 27

Ticker Company EPS Forecast
ANTM Anthem $2.53
GIB CGI Group USA $0.97
VFC VF $0.90
TDY Teledyne Technologies $3.05
KNX Knight Transportation $0.91
PB Prosperity Bancshares $1.35
OSK Oshkosh $0.73
NYCB New York Community Bancorp $0.26
CVLT Commvault Systems $0.47
EAT Brinker International $0.35
T AT&T $0.73
ABT Abbott $1.35
BA Boeing -$1.60
ADP ADP $1.29
NSC Norfolk Southern $2.49
PGR Progressive $1.64
GD General Dynamics $3.54
BX Blackstone $0.90
TEL TE Connectivity $1.28
APH Amphenol $1.02
GLW Corning $0.48
NDAQ Nasdaq Omx $1.46
MKTX MarketAxess $1.81
HES Hess -$0.65
ROL Rollins $0.11
TXT Textron $0.90
SEIC SEI Investments $0.78
PTC PTC $0.66
TTEK Tetra Tech $0.81
CACI Caci International $3.59
LSTR Landstar System $1.72
SLM SLM $0.36
RLI RLI $0.66
SLG SL Green Realty -$0.27
AXS Axis Capital -$0.28
AVT Avnet $0.39
CNS Cohen & Steers $0.68
CNMD CONMED $0.77
MTH Meritage Homes $3.33
CATY Cathay General Bancorp $0.76
ISBC Investors Bancorp $0.27
CALX Calix $0.33
CP Canadian Pacific Railway USA $5.03
AMP Ameriprise Financial $4.52
AAPL Apple $1.41
TSLA Tesla $1.04
FB Facebook $3.16
NOW ServiceNow $1.06
SYK Stryker $2.55
LRCX Lam Research $5.69
CCI Crown Castle International $0.62
EW Edwards Lifesciences $0.53
LVS Las Vegas Sands -$0.29
TER Teradyne $1.00
HOLX Hologic $2.17
URI United Rentals $4.26
DRE Duke Realty $0.16
RJF Raymond James Financial $1.65
PKG Packaging Of America $1.48
WHR Whirlpool $6.00
MKSI MKS Instruments $2.01
AZPN Aspen Technology $1.17
CREE Cree -$0.25
LPL Lg Display $0.19
CVBF CVB Financial $0.34
XLNX Xilinx $0.69
UMC United Microelectronics $0.08

Thursday (January 28)

IN THE SPOTLIGHT: Mastercard, McDonald’s, Visa

Mastercard Inc, a leader in global payments and a technology company, will post earnings of $1.53 per share for last quarter of 2020, which represents a year-over-year decline of about 22% from the same quarter a year ago when the company reported $1.96 cents per share.

McDonald’s Corporation, one of the world’s largest American fast-food chain, will post earnings of $1.79 per share for last quarter of 2020. Visa Inc is also expected to report first-quarter earnings on the same day, with earnings of $1.28 per share for the quarter.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 28

Ticker Company EPS Forecast
MKC McCormick $0.81
LEA Lear $3.40
FCFS FirstCash $0.82
VLO Valero Energy -$1.28
LUV Southwest Airlines -$1.66
AAL American Airlines -$4.12
NUE Nucor $1.16
MSCI Msci $1.92
JBLU JetBlue Airways -$1.67
FRME First Merchants $0.66
MA Mastercard $1.53
CMCSA Comcast $0.48
ATI Allegheny Technologies -$0.35
ABMD Abiomed $1.12
ADS Alliance Data Systems $2.44
TROW T. Rowe Price $2.64
MCD McDonalds $1.79
STM Stmicroelectronics $0.54
DHR Danaher $1.87
DOW Dow Chemical $0.64
CNX Consol Energy $0.16
SHW Sherwin-Williams $4.84
KEX Kirby $0.24
MO Altria $1.01
NTCT Netscout Systems $0.52
CFR Cullen/Frost Bankers $1.28
PNR Pentair Ordinary Share $0.63
TSCO Tractor Supply $1.47
PHM PulteGroup $1.39
EWBC East West Bancorp $1.01
RCI Rogers Communications USA $0.72
NOC Northrop Grumman $5.77
SWK Stanley Black & Decker $2.99
AIT Applied Industrial Technologies $0.74
BPOP Popular, Inc. $1.62
AOS A.O. Smith $0.58
XEL Xcel Energy $0.55
FLWS 1-800-Flowers $1.38
EXP Eagle Materials $1.74
MMC Marsh & McLennan Companies $1.13
COLB Columbia Banking System $0.60
BC Brunswick $1.02
FLEX Flextronics International $0.37
WRK WESTROCK $0.54
MTSI MACOM Technology Solutions $0.37
VLY Valley National Bancorp $0.25
PEXNY PTT Exploration & Production $0.01
DOV Dover $1.38
DLB Dolby Laboratories $0.34
FFBC First Financial Bancorp $0.45
HTH Hilltop $1.13
NATI National Instruments $0.13
RMD ResMed $1.25
GBCI Glacier Bancorp $0.74
ABCB Ameris Bancorp $1.16
CE Celanese $1.69
FIBK First Interstate BancSystem $0.80
JNPR Juniper Networks $0.53
SIGI Selective $1.20
V Visa $1.28
WDC Western Digital $0.52
EGHT 8X8 -$0.03
X United States Steel -$0.62
FHI Federated Hermes Inc $0.78
AJG Arthur J. Gallagher $0.78
SWKS Skyworks Solutions $2.08
OLN Olin -$0.11
MDLZ Mondelez International $0.66
PFG Principal Financial $1.42
EMN Eastman Chemical $1.50
ORI Old Republic International $0.43
FICO Fair Isaac $2.35
MSTR Microstrategy $1.62
RHI Robert Half International $0.68
LANC Lancaster Colony $1.57
RDN Radian $0.60
CAJ Canon $0.31
TOELY Tokyo Electron Ltd PK $0.78
HOCPY Hoya Corp $0.84
DGE Diageo £80.90
KPELY Keppel Corporation -$0.05
NVR NVR $78.78
FFIN First Financial Bankshares $0.37

Friday (January 29)

Ticker Company EPS Forecast
PSXP Phillips 66 Partners $0.89
JCI Johnson Controls $0.40
AN AutoNation $2.05
HON Honeywell International $2.00
MSGS Madison Square Garden Sports -$1.63
ATLCY Atlas Copco ADR $0.39
SAP SAP $1.95
LLY Eli Lilly $2.37
CHD Church Dwight $0.52
LHX L3Harris Technologies Inc $3.09
CL Colgate-Palmolive $0.76
BAH Booz Allen Hamilton $0.93
BBVA Banco Bilbaoizcaya Argentaria $0.13
ERIC Ericsson $0.20
RDY Drreddys Laboratories $0.58
CVX Chevron $0.07
SYF Synchrony Financial $0.89
CAT Caterpillar $1.48
CHTR Charter Communications $4.82
PSX Phillips 66 -$0.81
BMI Badger Meter $0.43
GNTX Gentex $0.50
ROP Roper Industries $3.49
WY Weyerhaeuser $0.42
LYB LyondellBasell Industries $1.36
ROLL Rbc Bearings $0.82
FBP First Bancorp FBP $0.18
KKR KKR & Co LP $0.41
HMC Honda Motor $0.89
GCTAY Siemens Gamesa ADR $0.02
NNIT Nnit A/S kr1.62
SPG Simon Property Group $0.85
ASEKY Aisin Seiki Co $1.19
ALNPY ANA Holdings ADR -$0.35
KMTUY Komatsu $0.26
TTM Tata Motors $0.17
TOTDY Toto $0.46

 

Top Blue Chip Picks for 2021

2020 has shaped up as an excellent year but it’s time to move on and think about 2021. Market leaders in one year often underperform in the following year as investors close out top performers and seek lower risk opportunities. These plays often come with stocks that have posted meager returns but are well-positioned for breakouts and sustained uptrends. Let’s look at three blue chip stocks that meet these criteria in an attempt to get a leg up on the competition.

COVID-19 recovery plays are sitting at the top of this list for obvious reasons but lesser known opportunities are developing as well. The broad market also ignored defensive and household plays through most of the year, instead chasing the hottest momentum stocks, initial public offerings, and special purpose acquisition companies (SPACs). These laggards could shine in 2021 because perennially strong performers rarely have two ‘off years’ in a row.

Visa

Dow component Visa Inc. (V) has benefited from the accelerated shift into digital payments triggered by the pandemic and is viewed as a major beneficiary. However, the company depends on payment volume to book profits, exposing price action to broad economic forces. It’s gained about 12% year-to date but has been stuck at the February high for more than three months. Fortunately, price action is now grinding through the last stages of a breakout pattern.

Pepsico

Pepsico Inc. (PEP) rose 23% in 2019 but has struggled in 2020, posting a mediocre 7% return despite an impressive 2.78% annual dividend yield. That’s still a big deal for non-U.S. traders because contracts for difference (CFDs) pay out dividends, just like shares. The stock rallied back to the February 2020 high above 147 in November and has now completed the last stage of a cup and handle pattern that will generate a measured move target in the 190s after a breakout.

McDonald’s

Dow component McDonald’s Corp. (MCD) topped out in August 2019, well before the pandemic hit world headlines. It failed a breakout above 2019 resistance in October 2020 and turned sharply lower, slumping to a three-month low. The stock has posted a meager 8% year-to-date return but that should improve in 2021, with the pandemic running its course and a bullish 18-month pattern that could complete a breakout in the first quarter.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Visa Could Rally 40% in 2021

Dow component Visa Inc. (V) price action has tracked the evolution of world economies during the COVID-19 pandemic, with credit and debit card spending plunging in the first quarter and recouping a good share of losses during the second and third quarters. Surprisingly, U.S. sales numbers are ticking higher in the fourth quarter despite surging infections around the world, forcing analysts to lift 2021 growth targets, especially in the United States.

Visa Breakout Pattern

Better yet, Visa has completed the last stage of a cup and handle pattern, with a breakout having the potential to lift the digital payments giant at least 30% to 40% in 2021.  Accumulation readings have already hit new highs, highlighting growing optimism about economic growth under a Biden administration. Even so, the winter of 2020 – 21 could throw a few curveballs, especially if hospitals get overwhelmed or the U.S. election dispute takes an unexpected turn.

Visa reported that November spending levels were similar to October on Wednesday, with U.S. payments volume up 6% year-over-year. Debit rose a healthy 19%, highlighting the switch from paper checks to digital transactions for everyday goods, while Credit declined 5%, indicating that more customers were using savings to pay for things. Unfortunately, other countries didn’t fare as well, with the United Kingdom, Italy, and Germany reporting lower payment volumes.

Wall Street And Technical Outlook

Wall Street has been wildly bullish on Visa for years, with a current ‘Strong Buy’ rating based upon 14 ‘Buy’ and 4 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines at this time. Price targets now range from a low of $195 to a Street-high $250 while the stock opened Wednesday’s U.S. session about $13 below the median $223 target. This placement should support plenty of upside after a breakout.

The stock topped out at 214 in February after a multiyear uptrend and sold off more than 40% during the pandemic decline. A two-legged recovery wave reached the prior high in September, giving way to a secondary downdraft that found support at the 200-day moving average. Price action bounced back to the prior peak in November, ahead of narrow sideways action that has now completed weekly- and daily-scale cup and handle breakout patterns.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Visa Shares Plunge About 5% on Q4 Earnings Disappointment; Analysts Cut Target Price

Visa Inc, the world’s largest card payment company, reported a lower-than-expected profit in the fourth quarter as consumers cut spending given the income and job uncertainty due to the COVID-19-led economic recession, sending its shares down over 5% on Wednesday.

The global technology payment company, which has a presence in more than 200 countries, said its net income fell to $2.4 billion, or $1.07 per Class A share, down from $3.03 billion, or $1.34 per Class A share, same period a year ago. On an adjusted basis Visa reported earnings of $1.06 per share, also lower than the market expectations of $1.09 per share, according to Reuters

“Visa’s fiscal fourth-quarter results largely mirrored what we saw from peer Mastercard earlier in the day. While there are positive trends in parts of its business as quarantine efforts ease, the pandemic is still a significant weight on overall results, with continuing major declines in revenue and margins,” said Brett Horn, senior equity analyst at Morningstar.

“Visa finished the fiscal year roughly in line with our expectations, and we will maintain our $171 fair value estimate and wide moat rating,” Horn added.

On Wednesday, Mastercard said its net income plunged 28% to $1.5 billion or $1.51 per share in the third quarter. Excluding items, profit was $1.60 per share. That was lower than the market expectations of $1.66.

Net revenues of $5.1B, a decrease of 17% or nearly 11% with service revenues recognized on current quarter payments volume. Payments volume, cross-border volume and processed transactions growth all improved through the quarter and were at varying stages of recovery. Full-year business drivers were all impacted by COVID-19 starting in March, with an improving trend exiting September, the company said in the statement.

Visa shares ended 4.83% lower at $180.87 on Wednesday; the stock is down about 4% so far this year.

Executive Comments

“While our business drivers and financial results were impacted by COVID-19 in 2020, we’ve made significant progress in advancing our growth strategy. Visa drove the adoption of eCommerce and tap to pay to accelerate cash digitization, successfully unlocked new flows by expanding Visa Direct and B2B partnerships and facilitated client innovation through our value-added services,” said Alfred F. Kelly, Jr., Chairman and Chief Executive Officer.

“As the world turns increasingly to digital payments, we see tremendous opportunity for growth. We’ll remain thoughtful in our investments as we advance our strategy to enable the movement of money for everyone, everywhere.”

Visa Stock Price Forecast

Fifteen equity analysts forecast the average price in 12 months at $227.53 with a high forecast of $250.00 and a low forecast of $205.00. The average price target represents a 25.80% increase from the last price of $180.87. From those 15 analysts, 13 rated “Buy”, two rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $228 with a high of $272 under a bull-case scenario and $146 under the worst-case scenario. The firm currently has an “overweight” rating on the credit-card processor’s stock. Jefferies decreased their stock price forecast to $195 from $205; Raymond James cut the target price to $211 from $217; Credit Suisse slashed their stock price forecast to $230 from $235; Piper Sandler lowered their target price to $200 from $206.

Several other analysts have also recently commented on the stock. KeyCorp upped their price objective on Visa to $230 from $215 and gave the stock an “overweight” rating in Sept. Royal Bank of Canada restated a “buy” rating and set a $243 price objective.

Analyst Comments

“Visa is on of our preferred stocks, as it is a key beneficiary of resilient global consumer spend growth, the ongoing shift from cash to electronic payments, and broadening merchant acceptance. Global Personal Consumption Expenditure and secular growth drivers should support low double-digit revenue growth in the near-to-medium term,” said James Faucette, equity analyst at Morgan Stanley.

“While COVID-19 headwinds are likely to persist, we see upside opportunity from the faster-than-expected recovery of travel. Continued investment in longer-term initiatives (faster payments, P2P, B2B) and partnerships continue to increase its TAM and offer an opportunity for compounding double-digit earnings growth for the foreseeable future,” Faucette added.

Upside and Downside Risks

Upside: 1) Ability to continue to meet/beat expectations. 2) Portfolio wins in Europe, with most of their contracts renegotiated. 3) Faster-than-expected adoption/scaling of B2B solutions, driving multiple expansion– highlighted by Morgan Stanley.

Downside: 1) Material slowdown in consumer spend; Further slowdown in cross-border growth. 2) Portfolio losses in the US. 3) Regulatory changes in key markets promoting domestic schemes.

Check out FX Empire’s earnings calendar

Stock Pick Update: August 5 – August 11, 2020

The broad stock market has extended its medium-term uptrend in the last five trading days (July 29 – August 4). The S&P 500 index broke above its late July local highs along 3,280 level and it crossed the 3,300 mark. More than four months ago on March 23, the market sold off to new medium-term low of 2,191.86. It was a stunning 35.4% below February 19 record high of 3,393.52. The corona virus and economic slowdown fears erased more than a third of the broad stock market value. But the index has rallied back closer to record high again. It is currently just 2.6% below the mentioned February’s record high.

The S&P 500 index has gained 2.46% between July 29 and August 4. In the same period of time our five long and five short stock picks have gained 0.75%. So stock picks were relatively weaker than the broad stock market. Our long stock picks have gained 0.81% and short stock picks have resulted in a gain of 0.68%.

There are risks that couldn’t be avoided in trading. Hence the need for proper money management and a relatively diversified stock portfolio. This is especially important if trading on a time basis – without using stop-loss/ profit target levels. We are just buying or selling stocks at open on Wednesday and selling or buying them back at close on the next Tuesday.

If stocks were in a prolonged downtrend, being able to profit anyway, would be extremely valuable. Of course, it’s not the point of our Stock Pick Updates to forecast where the general stock market is likely to move, but rather to provide you with stocks that are likely to generate profits regardless of what the S&P does.

This means that our overall stock-picking performance can be summarized on the chart below. The assumptions are: starting with $100k, no leverage used. The data before Dec 24, 2019 comes from our internal tests and data after that can be verified by individual Stock Pick Updates posted on our website.

Below we include statistics and the details of our three recent updates:

  • August 4, 2020
    Long Picks (July 29 open – August 4 close % change): IFF (-2.27%), WBA (+0.24%), ED (-0.50%), XOM (-0.55%), WU (+7.13%)
    Short Picks (July 29 open – August 4 close % change): HES (+1.34%), XLNX (+2.30%), SPGI (-0.71%), APD (-3.33%), KO (-3.01%)Average long result: +0.81%, average short result: +0.68%
    Total profit (average): +0.75%
  • July 28, 2020
    Long Picks (July 22 open – July 28 close % change): MLM (-5.87%), MCD (+1.57%), INTC (-19.84%), XOM (-1.36%), IRM (+2.58%)
    Short Picks (July 22 open – July 28 close % change): COG (-0.38%), WY (+6.86%), SPGI (-1.77%), APD (-0.40%), HD (+1.02%)Average long result: -4.59%, average short result: -1.07%
    Total profit (average): -2.83%
  • July 21, 2020
    Long Picks (July 15 open – July 21 close % change): DOW (-1.40%), INTC (+2.83%), MCD (-0.47%), XOM (-0.84%), HST (-1.54%)
    Short Picks (July 15 open – July 21 close % change): COG (+4.57%), VNO (-5.52%), AON (+2.30%), LIN (+1.36%), AAPL (-2.01%)Average long result: -0.28%, average short result: -0.14%
    Total profit (average): -0.21%

Let’s check which stocks could magnify S&P’s gains in case it rallies, and which stocks would be likely to decline the most if S&P plunges. Here are our stock picks for the Wednesday, August 5 – Tuesday, August 11 period.

We will assume the following: the stocks will be bought or sold short on the opening of today’s trading session (August 5) and sold or bought back on the closing of the next Tuesday’s trading session (August 11).

We will provide stock trading ideas based on our in-depth technical and fundamental analysis, but since the main point of this publication is to provide the top 5 long and top 5 short candidates (our opinion, not an investment advice) for this week, we will focus solely on the technicals. The latter are simply more useful in case of short-term trades.

First, we will take a look at the recent performance by sector. It may show us which sector is likely to perform best in the near future and which sector is likely to lag. Then, we will select our buy and sell stock picks.

There are eleven stock market sectors: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Technology, Communications Services, Utilities and Real Estate. They are further divided into industries, but we will just stick with these main sectors of the stock market.

We will analyze them and their relative performance by looking at the Select Sector SPDR ETF’s.

Based on the above, we decided to choose our stock picks for the next week. We will choose our top 3 long and top 3 short candidates using trend-following approach, and top 2 long and top 2 short candidates using contrarian approach:

Trend-following approach:

  • buys: 1 x Technology, 1 x Consumer Staples, 1 x Materials
  • sells: 1 x Energy, 1 x Real Estate, 1 x Financials

Contrarian approach (betting against the recent trend):

  • buys: 1 x Energy, 1 x Real Estate
  • sells: 1 x Technology, 1 x Consumer Staples

Trend-following approach

Top 3 Buy Candidates

V Visa Inc. – Technology

  • Stock remains above two-month-long upward trend line
  • Potential medium-term uptrend continuation
  • The resistance level of $200

WBA Walgreens Boots Alliance, Inc. – Consumer Staples

  • Potential short-term uptrend continuation pattern – bull flag
  • The resistance level of $44 (short-term upside profit target)
  • The support level remains at $38-39

ECL Ecolab, Inc. – Materials

  • Stock remains above the support level of $185
  • Potential medium-term bull flag pattern
  • The resistance level and upside profit target level at $205-215

Summing up, the above trend-following long stock picks are just a part of our whole Stock Pick Update. The Technology, Consumer Staples and Materials sectors were relatively the strongest in the last 30 days. So that part of our ten long and short stock picks is meant to outperform in the coming days if the broad stock market acts similarly as it did before.

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Stock Pick Update – this analysis’ full version. There, we include the stock market sector analysis for the past month and remaining long and short stock picks for the next week. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today.

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

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Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Middle-Week Screening: Gold Glitters and Shines!

Overview and trends

US stocks rose on Monday as investors looked to major earnings on deck this week and awaited the release of the GOP’s coronavirus stimulus plan. Senate Majority Leader Mitch McConnell finally said that Republicans were ready to present their long-awaited $1 trillion COVID-19 package details, as Democrats remained wary. S&P 500 ended up 0.74%, while Dow Jones Industrial Average was higher 0.44%, and Nasdaq Composite shot up 1.86%.

US stock indices ended down from 0.65% to 1.27% yesterday as investors mulled Senate Republicans’ coronavirus stimulus package and a slew of very surprising earnings reports.

The U.S. republicans continued debating on its fiscal relief plan most of the day. The projected $1 trillion packages will include another round of $1,200 payment checks and additional funds for small-business loans.

A large portion of reporting yesterday companies sadly missed their earnings figures, with most disappointments coming from 3M, McDonald’s and even biotech Pfizer. Oil tumbled through the session, with West Texas Intermediate crude dropping as much as 1.5%, to $41.10 per barrel.

Gold was the leading instrument in the 1st half of trading week. Gold prices took a stratospheric leap last week, jumping from the previous week’s support test at $1800 an ounce to the $1900 level that hasn’t been traded since 2011.

Next day Gold jumped to a record high of $1944 per ounce, driven by an uptick in new U.S. coronavirus cases that have added to economic uncertainty. Shares of Moderna surged after the company said it received an additional $472 million in funding for its COVID-19 vaccine.

Trading ideas

According to a new court filing, multiple California state offices are actively investigating Amazon (AMZN) over worker safety concerns as the coronavirus continues to rage throughout the U.S. An eighth Amazon employee has died of COVID-19, and the virus has spread quickly through clusters of employees at factory floors and warehouses nationwide where social distancing isn’t enforced. Amazon’s own shipping centers have reported outbreaks, including one in the Pocono Mountains and another in Oregon.

The earnings date for Amazon is July 31, an overwhelming majority of high-profile analysts think the numbers will be as stellar as never before. Amazon’s average EPS estimate is $3.6 versus $5.01 it actually earned last quarter. It’s easy to guess that Amazon will beat that number indeed. However, even the bigger question will be how the tech giant is going to address these mounting allegations about poor safety of its employees. It looks like this time around it’s no longer just curiosity.

Global payments processor Visa reports earnings today, on July 29, and it will be more than just one more set of quarterly financial numbers. Investors will get a direct insight into how consumer spending is being affected by the pandemic and an uncertain economy. This quarter revenue for the payments processing giant are expected to drop by roughly 17% to $4.81 billion versus $5.84 billion a year ago. This anticipated drop has a lot to do with lower transaction volume as many stores were closed throughout the quarter. With that said, there is optimism for a potential beat driven by increased digital payment volume as more and more people shopped online.

Indeed, dealing with paper money has now become not only unsafe but also unsanitary. So VISA’s performance will be more or less accurately reflecting the real global consumer spending, and households’ entire propensity to consume, and how efficient the world’s largest central banks’ and governments’ efforts to offset the COVID-19 impact. So fasten your seatbelts!

The Australian dollar has rallied rather significantly on Monday, showing signs of life yet again as the U.S. dollar continues to get hammered against most currencies. Aussie pierced below 1.40 mark, and now this level became its support, rather than resistance level. A couple of times over the past several trading sessions it tried to approach it, but the big return looked invariably spectacular.

So, this level now can be seen as a cemented support for the Australian currency. Its further growth towards 1.35 is highly dependent on the continuation of the gold rally. Australia is the second-largest gold producer in the world with 325 tons per year, right after China. By the way, 2019 was a record year for Australian gold production.

So, the momentum the Australian currency has been gaining lately is not just a coincidence, and if greenback keeps getting softer, and metals keep getting stronger, it would be hard to find a better choice than to take a chance on the Aussie.

One of the less-talked-about but more potent beneficiaries of this year’s gold rally Kinross Gold (KGC) is scheduled to announce Q2 earnings results today, on July 29th, after market close.

The consensus EPS estimate is 13 cents and the consensus revenue estimate is around $1 billion (assuming a 20% growth Year-over-Year). Over the last 2 years, Kinross Gold has beaten EPS estimates 63% of the time and has beaten revenue estimates 50% of the time.

Kinross is gaining from higher production at its two main deposit fields, which already had shown strong momentum in this year’s first quarter. Strong production is likely to have continued in the second quarter. Further, gold prices have been soaring this year making it the most attractive safe-haven asset. Gold prices have gained around 13% in the second quarter — the highest quarterly percentage increase in more than four years.

by Vladimir Rojankovski, Grand Capital Chief Analyst

Visa Q3 Profit Plunges 23% as Consumers Cut Spending Amid COVID-19 Crisis; Target Price $210

Visa Inc, the world’s largest card payment company, reported that its quarterly profit plunged 23% in the third quarter of fiscal 2020 as large-scale layoffs due to the lockdowns, aimed at limiting the spread of coronavirus, dented consumer spending.

The global technology payment company, which has a presence in more than 200 countries, said in the quarter ended June 30, its net income fell to $2.4 billion, or $1.07 per share, compared to $3.10 billion, or $1.37 per share, seen a year earlier.

Just after the result, Visa shares fell about 2% after market hours, closed 0.1% lower at $196.74 on Tuesday. So far, the deadly virus has infected more than 16.57 million people in 210 countries and killed over 650 thousand.

“Visa’s F3Q20 results were slightly ahead of our expectations, but positive US volume trends seem to flatten vs. late June as we had feared. Cross-border volumes have stabilized but remain under pressure – a trend we expect will continue through FY20. We expect the stock to be range-bound near term,” said George Mihalos, equity analyst at Cowen.

Visa’s payments volume for the three months ended June 30, 2020, decreased 10% over the prior year on a constant-dollar basis and total processed transactions, which represent transactions processed by Visa, were 30.7 billion, a 13% decrease over the prior year.

The company said its cross-border volume excluding transactions within Europe, which drive their international transaction revenues, declined 47% on a constant-dollar basis. Including cross-border transactions within Europe, the decline on a constant-dollar basis was 37% in the quarter. Net revenues fell 17% to $4.8 billion.

“Domestic recovery appears to have stalled and no sign of a bounce in cross-border in updated volumes through July 21st. The uptrend in domestic volumes has stalled July MTD, with growth rates showing modest deceleration relative to the start of the month likely the result of recently tightened COVID-related restrictions in several key states,” said Trevor Williams, equity analyst at Jefferies, who gave a price target of $185.

“Interestingly, while card-present growth has remained largely flat relative to 2H June, card not present growth (ex-Travel) has decelerated modestly from early in July, though as stayed in a fairly consistent band of +30-40% y/y growth since early June. Cross-border growth remains depressed excluding intra-Europe transactions, down more than 40% y/y MTD in July, which marks a slight deceleration relative to trends in early June.”

Executive comment

“We continue to focus on managing our business for the medium and long-term despite the challenges of the global pandemic. In the quarter, we were pleased to see strong growth in areas that are strategically important, including eCommerce, tap to pay, new flows and value-added services. We remain committed to our strategy and are thoughtfully investing to fuel Visa’s future performance,” said Chairman and Chief Executive Officer Alfred F. Kelly.

Visa stock forecast

Nineteen analysts forecast the average price in 12 months at $211.58 with a high forecast of $247.00 and a low forecast of $188.00. The average price target represents a 7.54% increase from the last price of $196.74. From those 19, 17 analysts rated ‘Buy’, two analysts rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $203 with a high of $277 under a bull scenario and $137 under the worst-case scenario. Evercore ISI raised its target price to $247 from $226; Piper Sandler raised the price target to $206 from $200 and Compass Point raised its target price to $230 from $200.

Several other equity researches have also recently upgraded their stock outlook. Wells Fargo raised the target price to $220 from $205, Citigroup raised the target price to $227 from $223, JP Morgan raised it to $203 from $182. Barclays raised it to $220 from $209 and RBC raised it to $247 from $212.

We think it is good to buy at the current level and target at least $210 in the short-term and $250 in a best-case scenario as 50-day Moving Average and 100-200-day MACD Oscillator signals a buying opportunity.

Analyst comment

“Visa is on of our preferred stocks, as it is a key beneficiary of resilient global consumer spend growth, the ongoing shift from cash to electronic payments, and broadening merchant acceptance. Global Personal Consumption Expenditure and secular growth drivers should support high-single digit volume growth and low double-digit revenue growth in the near-to-medium term,” noted James Faucette, equity analyst at Morgan Stanley.

“The threat of disruption from new entrants is fairly low given Visa’s competitive cost structure and moat. Continued investment in longer-term initiatives (faster payments, P2P, B2B) and partnerships continue to increase its TAM and offer an opportunity for compounding double-digit earnings growth for the foreseeable future,” he added.

American Express Could Sell Off To March Low

Dow component American Express Co. (AXP) reported mixed Q2 2020 results last week, with $0.29 per-share (EPS) beating profit estimates, while revenue of $7.67 billion fell well short of $8.25 billion expectations. Revenue contracted a staggering 29.2% year-over-year, undermined by the ongoing impact of the COVID-19 pandemic. The release triggered a modest sell-the-news reaction, dropping the stock 1.4% to a 2-week low.

American Express Heavily Exposed To Business Travel

The travel services giant has been pummeled by the pandemic, losing significant income since corporations worldwide stopped business travel in the first quarter and sent employees home to work through virtual meeting spaces. Many industry experts now believe that many of Amex’s blue chip customers will remain sidelined well after the infection runs its course, addicted to the lower costs of conducting business digitally, rather than in person.

Executives summed up the tough quarter, noting “while our second quarter results reflect the challenges of the current environment, we remain confident that our strategy for navigating this period of uncertainty is the right one. Our customers continue to be engaged with our products and services; we have a productive and dedicated workforce; our capital and liquidity levels remain strong; and we continue to focus on those areas most critical to our long-term growth.”

Wall Street And Technical Outlook

Wall Street consensus has grown increasing cautious on American Express in the last two months, unlike Mastercard Inc. (MA) and Visa Inc. (V), who have continued to book significant income through high volumes of digital transactions. It’s currently rated as a ‘Hold’, based upon 6 ‘Buy’ and 9 ‘Hold’ recommendations. Three analysts are now telling shareholders it makes sense to sell positions and move to the sidelines. Price targets range from a low of $85 to a street high $119 while the stock is trading about $6 below the median $101 target.

Technically-speaking, there’s little to love about American Express, which looks like a better short sale opportunity than long-term investment through the second half of 2020. It posted an all-time high in January, fell more than 50% into March, and reversed at the 200-day moving average in June, settling in the lower half of the 6-month range. Ominously, accumulation readings have dropped to depressed March levels, predicting that price may soon follow.