VISA
Visa: MA/V: Inflation optionality could provide upside for the Networks -- RBC Capital Mkts (220.79 +2.14)
RBC's Daniel Perlin added, "With expectations for inflation continuing to mount, as highlighted by RBC's US Economics team, we believe Mastercard and Visa represent the best way to invest in this theme in our universe, either offensively with higher prices or defensively as an inflation hedge. Relative valuation favors Visa over Mastercard, near term. Since 2016, Mastercard, on average, has traded at a P/E premium to Visa of ~2.4pts, which recently has increased to over 5pts. The recent premium could be driven partly by the DOJ's recent inquiry into Visa's debt practices, suggesting its relative market share in the U.S. is largely tapped out vs. Mastercard. Nevertheless, we believe the current 5pt gap is too wide and will narrow closer to its historical average throughout the year, as a nearterm travel rebound likely favors U.S. outbound travel first relative to Europe and thus should benefit Visa, given it has almost 2x the market share in the U.S. vs. Mastercard. All else equal, we believe both names remain attractive, as the Street is still potentially under-modeling both companies given the possible travel/consumer rebound outlined in our March 15, 2021 note."
