Jan 27 (Reuters) – Mastercard Inc ( MA.N ) and Visa Inc ( VN ) will rely on China’s reopening to give a boost to travel spending, Wall Street analysts said, as the pace of growth in parts of rest of the world is softened by a post-pandemic boom.
Payments company executives on Thursday highlighted further scope for a travel recovery in China, which earlier this month reopened its borders after lifting strict COVID-19 containment measures.
After the holidays for most of last year, consumers have started to cut back on leisure spending as the Federal Reserve aggressively tightened monetary policy, raising fears of a recession and triggering mass layoffs.
As payment processors head into 2023, they will also face tough comparisons to last year, which saw strong growth, analysts said.
“The impact of the recovery on cross-border transactions is likely to diminish in the future, and this recovery could be at risk in the near term if the economy takes a negative turn,” said Morningstar analyst Brett Horn.
“However, China’s reopening should act as a modest boost.”
At least seven brokerages raised their price targets (PT) on Mastercard, while six of them raised their PTs on Visa after both companies reported quarterly earnings that beat Wall Street estimates on Thursday.
Visa shares rose nearly 3% on Friday, while Mastercard rose nearly 1% in choppy trading.
“Consumer spending has remained surprisingly resilient, but the reopening has not been worked on in earnest – particularly in Asia where there is pent-up demand for travel following China’s reopening,” said Macquarie Group analyst Paul Golding.
Both Visa and Mastercard warned of a moderating travel recovery, but credit card lender American Express Co ( AXP.N ) played down those fears on Friday, pointing out that high-income customers, whom the company mainly take care, they are still good.
Reporting by Niket Nishant in Bengaluru; Editing by Shailesh Kuber
Our Standards: The Thomson Reuters Trust Principles.
