Atlantic Equities Prefers High Quality Names Such as Visa, Downgrades Fiserv

By Sam Boughedda

Fiserv Inc (NASDAQ:) was downgraded to Neutral with a $105 price target by Atlantic Equities on Wednesday, with the firm saying it prefers Visa (NYSE:) in a recession.

In a wide-ranging note on US payment firms, analysts said Visa, which has an Overweight rating and $230 price target at Atlantic, has an attractive valuation.

The analysts explained that given the increasing likelihood that the US and global economies will enter recession, they are now assuming a modest economic downturn in their 2023 forecasts and believe payments stocks are starting to discount this scenario. Still, in the near term, they prefer high-quality stocks with attractive valuations and limited downside to consensus earnings forecasts.

“Visa shares have recently come under pressure for the company’s travel exposure heading into an economic downturn. However, Visa is still one of the highest quality companies riding secular M-HSD card volume growth, is expanding its services and new flows businesses, and the stock is trading at a ~40% premium to the PE, which is close to all-time lows,” wrote the analysts. “The cyclical concerns are captured in the low relative valuation and we believe the regulatory and disruption concerns remain manageable.”

Meanwhile, the analysts said that Fiserv’s merchant business has outperformed its traditional competitors due to Clover, but the firm is now moving to the sidelines.

“With the shares only down 8% YTD, the stock is now at a significant premium to peers, its long-term targets for Clover look too aggressive and the company’s 3x leverage could weigh on estimates,” they wrote.

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