2022-10-03-V.N-Visa Inc. Adjusting Estimates on FX Headwinds

James.Faucette@morganstanley.comJeff.D.Goldstein@morganstanley.comMeryl.Thomas@morganstanley.comSandy.Beatty@morganstanley.comJonathan.Y.Lee@morganstanley.comMichael.Infante@morganstanley.comMORGAN STANLEY & CO. LLCJames E FaucetteEQUITY ANALYST+1 212 296-5771Jeffrey D Goldstein, CFAEQUITY ANALYST+1 212 761-1197Meryl R Thomas, CFARESEARCH ASSOCIATE+1 212 761-0774Sandy Beatty, CFARESEARCH ASSOCIATE+1 212 761-5777Jonathan Y LeeEQUITY ANALYST+1 212 761-9499Michael N InfanteRESEARCH ASSOCIATE+1 212 761-4631Payments and Processing / United States of AmericaStock RatingOverweightIndustry ViewAttractivePrice target$282.00Shr price, close (Sep 30, 2022)$177.65Mkt cap, curr (mm)$378,21752-Week Range$236.96-174.84Fiscal Year EndingFiscal Year Ending09/2109/2109/22e09/22e09/23e09/23e09/24e09/24eModelWare EPS ($)5.917.418.229.54P/E37.724.021.618.6EPS ($)§5.837.428.419.86Div yld (%)0.60.81.01.1Unless otherwise noted, all metrics are based on Morgan Stanley ModelWareframework§ = Consensus data is provided by Refinitiv Estimatese = Morgan Stanley Research estimatesCash your FinTech Check. Listen in to the previousepisode of our FinTech podcast, The FinTech Check,where James hosts Sheena Shah, leadCryptocurrency Strategist at Morgan Stanley, anddiscusses the impact of the ETH Merge, stablecoinmarket cap and regulation, and the impact of fedactions on crypto prices. Listen here. Stock RatingOverweight Industry ViewAttractive Price Target$282.00Visa Inc.Visa Inc. || North America North AmericaAdjusting Estimates on FXHeadwindsGiven the large international exposure at V/MA, '23 EPS comesdown by 3-4% after we incorporate recent strengthening ofthe USD. We stay OW as we remain bullish on the travelrecovery and valuation is notably compelling.WHAT'SCHANGED Visa Inc. (V.N)FromToPrice Target$291.00$282.00MasterCard Inc (MA.N)Price Target$457.00$441.00Incorporating FX headwinds in estimates. With both V and MA generating morethan half of their revenue internationally, the recent shock to the currencymarkets likely drives downside to estimates, all things being equal. Accordingly,in CY22, we reduce our V/MA adj. EPS by ~1-1.5%, while In CY23, the impact ismore meaningful given a full year of a stronger U.S. dollar. In '23, we lower our Vrevenue/adj. EPS by ~2%/~3% and our MA revenue/adj. EPS by ~2.5%/3.5%. Giventhese lower estimates, we lower our PT to $282 at V ($291 prior) and $441 at MA($457 prior), but stay OW given our confidence in the travel recovery, withcurrent valuation levels representing a compelling buying opportunity.We estimate V/MA '23 currency baskets are now 200-300bps weaker since lastearnings. Given the number of countries in which V/MA operates, there is anexpansive list of currencies which impact V/MA results. We broadly use V/MA'srevenue mix and volume breakdown by region to help guide our currency basket,though we would note that the estimated currency impact will naturally besensitive to the assumed mix. For reference, 54% of Visa's revenue is