Analysts at Morgan Keegan & Co. and Piper Jaffray & Co. upgraded Visa Inc. shares to "buy" or the equivalent Tuesday.
Citing the company's "long-term franchise value," Morgan Keegan analyst Robert Dodd wrote in a note to clients that Visa's shares are "attractively valued" relative to profit. It will be able to increase earnings because of positive pricing and cost controls while consumer spending slows, he wrote in a note Tuesday.
"In the near-term some technical pressures may continue, however, due to the long-term franchise value and secular trends in … [Visa's] favor we believe these levels are attractive for new monies," wrote Mr. Dodd, who previously rated the company "market perform."
Mr. Dodd, based in Memphis for Morgan Keegan, a unit of Regions Financial Corp., lowered Visa's earnings per share estimate for 2009 to $2.68, from $2.76, citing the "deteriorating economic environment" and slower card volume growth. He cut his 2008 earnings projection by 1 cent, to $2.19.
Visa climbed 5.8%, to $62.30, at 8:54 a.m. in New York before the official open of U.S. exchanges. However, by midafternoon its shares were off 3.8%, to $56.65.
The San Francisco company has gained 4.2% since its March initial public offering, compared with a 23% decline for the Standard & Poor's 500 index in that period.
Piper Jaffray said Visa should be on the shortlist of stocks investors will want to own through this economic downturn, and upgraded the stock to a "buy."
The firm said Visa's buffers against an economic slowdown include its leadership in debit transactions, which account for 35% of payment volume; its non-U.S. and non-Europe payment volume; and its ability to use its scale to increase margins.
Piper Jaffray estimated that Visa's credit payments volume will decline only 2% next fiscal year and that it will have debit growth of 10%. The stock's recent pullback makes Visa even more attractive, the firm said.
