Piper Sandler initiated coverage Monday Visa Inc (V  ) and Mastercard Inc (MA  ) with Overweight ratings, citing their strong positions in the global payments landscape and potential for sustained growth.

Analyst Arvind Ramnani said that Visa and Mastercard are attractive businesses to own. They're both poised to benefit from:

  • Scale
  • Extensive FinTech ecosystem partnerships
  • Exposure to sustainable secular growth within digital payments
Both companies have significant tech investments, including in generative AI, which could drive upside to fundamentals, according to Ramnani.

Mastercard's Growth Drivers

Ramnani expects Mastercard to deliver 11.0% this year and 12.7%+ revenue growth by FY25. He also expected the company to report mid-to-high teens EPS growth over the next three years.

Ramnani sees several drivers for Mastercard's growth, including its strong Payment Network revenue growth and the expansion of Value-added Services and Solutions. With an annual transaction volume of $9 trillion and a vast TAM exceeding $250 trillion, Mastercard is well-positioned to capitalize on the shift away from cash transactions and the growth of new service and tech offerings, sustaining its margin expansion and disrupting traditional payment methods.

Visa's Growth Drivers

Similarly, Ramnani believes Visa can drive revenue growth of 10.7% and top-line/bottom-line margins of +11%/+12%.

Visa's growth drivers include its Data Processing, Services, and International segments. Its foundational offering has an annual transaction volume of around $15 trillion and a TAM exceeding $250 trillion. Visa's growth is expected to be driven by new flows, value-added services, and international growth, supported by its extensive FinTech ecosystem partnerships. Ramnani expects Visa to sustain its operating margin expansion through continued execution and efficiencies from new and emerging technologies, potentially unlocking further value for the stock.

Visa and Mastercard Ratings

  • Ramnani initiated coverage on Visa stock with a price target of $322 and Overweight rating.
  • He initiated coverage on Mastercard with a $531 price target and Overweight rating.
  • Both Visa and Mastercard have significant untapped total addressable markets (TAM), with a potential opportunity of over $255 trillion, particularly in consumer payments where a $45 trillion TAM exists.
Ramnani's bullish outlook on Visa and Mastercard underscores the potential for continued growth and value creation in the global payments industry, driven by innovative technologies like GenAI and the companies' strategic investments in their businesses.