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Investing.com -- Monness, Crespi, Hardt downgraded shares of Fiserv (NYSE:FI) to Sell from Neutral and Mastercard (NYSE:MA) to Neutral from Buy on concerns over rich valuations, potential multiple contraction, and increasing sensitivity to slowing payment volume growth. Analyst sees rising risks to multiples as macro uncertainty grows.
The firm assigned Fiserv a $145 price target, warning that investor expectations, particularly for its Clover point-of-sale unit, appear too lofty against a backdrop of weakening consumer trends and softening discretionary spending.
While both Fiserv and Mastercard are viewed as high-quality companies with strong return on invested capital, Monness argued that the macro environment could erode the valuation premiums these companies enjoy.
For Mastercard, Monness cited its high earnings multiple, currently in the 82nd percentile of next-twelve-month (NTM) EPS estimates, as vulnerable to derating in a slowing macro environment.
They flagged that even in the absence of significant estimate revisions, a return to median historical multiples would imply a share price around $400.
The analysts expect Mastercard to be more insulated than peer Visa (NYSE:V) due to its focus on value-added services like tokenization and fraud prevention.
However cautioned that many of the levers supporting topline growth, including VAS and international expansion — may lose steam in a weaker macro backdrop.
The downgrade also reflects weakening consumer and travel data, with soft TSA checkpoint trends and Delta warning of softening travel demand.
Monness noted that recent ARS and retail data indicate a loss of momentum, particularly in discretionary categories such as restaurants — a key vertical for Clover.
While Monness ntoed Fiserv’s balance sheet remains healthy and debt maturities are manageable, they argued the stock does not yet reflect rising downside risks.
The view is the ability to upsell at restaurant/retail likely to be limited, and potential for impact on transaction levels is more impactful than presently reflected in shares.
Upcoming bank earnings and potential guidance cuts from large financials may serve as further catalysts for downward estimate revisions across the payments sector, the firm added.
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