Visa Inc. (V:US) climbed to a record high after Nomura Holdings Inc. said a long-term global shift away from cash would help the bank-card network at Western Union Co.’s expense.
Visa advanced $3.91, or 2.4 percent, to $164 in New York, the highest since the Foster City, California-based company’s March 2008 initial public offering (V:US). Western Union, the world’s largest money-transfer business, climbed 2 cents to $14.66 and has dropped 18 percent in the past year.
“Visa continues to thrive in a world of electronic payments,” Bill Carcache and Tulu Yunus, Nomura analysts, said today in a research note. Threats from Visa and other established competitors, and new ones such as Xoom Corp. (XOOM:US), an online money-transfer firm, will pressure Western Union’s revenue as demand erodes for its primary business of helping people send money from agent locations, they wrote.
Worldwide purchases with credit and debit cards are projected to surpass $21.3 trillion in 2016, a 73 percent increase from 2011, according to the Nilson Report, an industry newsletter. Visa, the world’s biggest payments network, posted a $1.29 billion profit (V:US) in the fiscal first quarter ended Dec. 31, a 26 percent increase from a year earlier, as card spending climbed 8.7 percent.
“Our No. 1 competitor is cash,” Visa Chief Executive Officer Charlie Scharf, 47, said last week during an investor presentation. “There is so much cash out there that our jobs have to be to eliminate the cash.”
MasterCard Inc. (MA:US) CEO Ajay Banga, 53, whose Purchase, New York-based company runs the second-biggest network by processed transactions, previously declared a “war on cash.”
Western Union said last month that fourth-quarter profit plunged 47 percent to $237.9 million and that the Englewood, Colorado-based firm expects “low single digit” revenue declines this year before sales and profit growth resume in 2014.
San Francisco-based Xoom has surged (XOOM:US) 44 percent to $23.02 since going public in February. “We continue to see pressure from emerging money-transfer alternatives building,” the Nomura analysts wrote.
Carcache and Yunus, who titled their research note “Cash Is Not King,” have an overweight rating on Visa and a target price of $172. They rate Western Union as neutral and predict the shares will fall to $13.
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