Christopher Donat (Piper Sandler Analyst) downgraded Visa shares (NYSE 🙂 and Mastercard (NYSE 🙂 to Neutral, and Underweight respectively. This was to reflect Europe’s challenging macroeconomic environment.

Piper’s Macro Team is increasingly worried that Europe may enter a recession in 2023, a scenario that would be negative for payment companies given their exposure to Europe.

“Europe is MA’s largest region and V’s second largest. We think that a more challenging revenue scenario in 2023 will put future pressure on earnings estimates and the P/E multiples for both companies,” Donat said in a client note.

Also, the analyst reduced FY23 earnings estimates. He then lowered Visa’s price target to $239.00 per shares, down from $283.00. The new PT is for MA at $357.00 instead of $360.00.

“While our biggest concern is a European recession, other factors also weigh on our outlook. Our concern is that Asia may experience a slowdown in payment growth, which could lead to a new normal. This might last years. Our belief is that inflation and other macro-factors could reduce discretionary spending and slow down cross border activity. We also see headwinds to GAAP earnings growth from unfavorable FX trends,” the analyst added.

Pre-open Friday saw shares of Visa and Mastercard fall 1.4%.

By Senad Karaahmetovic