Demand for payment processing from MasterCard (MA) and Visa (V) is growing secularly both domestically and abroad as merchants are moving away from the age-old tradition of cash and into electronic transactions, making Kevin D. McVeigh, Analyst at Macquarie Group Limited bullish on these stocks.
“Ideas that we are focusing on include great secular plays on the processing side of our coverage, including MasterCard and Visa, where there’s a great secular shift away from traditional forms of physical cash payment into credit as well as debit, and just very good secular growth drivers,” McVeigh said.
McVeigh says economic growth bodes well for payment processors. He expects strong growth domestically in the second half of 2013, and he says this year could be the year Europe stabilizes, which would be a positive for the global economy, to the point it would offset the uncertainty of U.S. health care law changes.
“One area that we would focus on from a potential negative perspective is, as people start to get a sense of what the impact of this health care law will be, whether or not that causes some slowdown in hiring,” McVeigh said, but adds that “the impact of Europe in 2013 if we start to see some stabilization there, coupled with a positive contribution from housing and continued benefit from auto, hopefully will be enough to offset any of the negative impacts from this health care law.”