Analysts are Cutting the Price Target for This Payments Processor. What do the Charts Tell Us?
It’s easy to look around and see that spending is down at most companies, but one of the unseen aspects of the present COVID-19 slowdown is the affect it has had on cross-border travel spending. Global companies like Visa Inc (V) are getting hit on all sides as fewer swipes are happening across the globe.
As the uncertainty grows, many analysts are cutting their price targets rather than lowering the rating of the company. For example, RBC Capital Markets analyst Daniel Perin cut his target from $217 to $195 but kept his outperform rating. As analysts weigh the depth and length of the impact, this is the first step toward eventually downgrading the company if the slowdown continues.
After falling from nearly $215 to $130, Visa finally rebounded last week as the stock rallied nearly $40 from its low. As the price finished the week, the volume began to decline, but then expanded on Tuesday as the price closed near Monday’s low. The weakness has occurred at a level that is historically significant. The price used $170 as support last fall and has cause the price to stall the past several days.
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The near-term projection for the price is $152, which is the 50% retracement level of its move off of support. This may begin a longer consolidation phase before the next significant move higher or lower.
Option traders might want to consider a higher probability approach to this stock in order to give the price some time and room to move. The 15 MAY 20 175/180 short call vertical can be sold for around $2.00. That provides a max gain of $200 per contract, or 66% return, if the price closes below $175 by expiration. Consider closing early if the vertical can be bought back for $0.40 or less.