Payment play Visa could be ready to pop.
With the company benefiting from e-commerce trends during the coronavirus pandemic and the stock digesting a recent top- and bottom-line earnings beat, there looks to be more runway from here, Todd Gordon, managing director at Ascent Wealth Partners, told CNBC’s “Trading Nation” on Tuesday.
“There’s a very high barrier to entry in the payment space,” he said, calling Visa and Mastercard a “duopoly.”
The two payment processors account for roughly 45% and 24.5% of global card transactions, respectively, according to data firm Nilson.
Recent additions to Visa’s bull case include “several initiatives to expand their small business offerings — specifically digital and e-commerce — as well as their touchless point-of-sale offerings for brick and mortar,” Gordon said.
He added that the company announced on Tuesday “a $500 million green bond offering to finance projects focused on energy-efficient improvements, renewable energy and sustainability.”
As for the technicals, the key level to watch on Visa’s chart is $200, Gordon said. Shares of the credit card giant closed half of 1% higher on Tuesday at $197.77.
“We have been in a consolidation” for several months, he said. “It looks to be on the back of that green bond announcement that it looks to be we may be breaking resistance here.”
“We obviously have support or a floor established” at the top of Visa’s resistance area around the $200 mark, Gordon said.
“We’d like to stay above 200 on the way up hopefully to retest those highs and we see no reason why that should not happen,” he said. “We hold Visa in our global growth strategy. It’s one of our larger holdings. We are quite bullish on the space whether we do return to some normalcy with a vaccine or we do stay under lockdown as we are now. We see Visa as benefiting regardless.”
One way traders could bet on a bigger breakout for Visa could be via a bullish call spread in the options market, Gordon said.
He suggested a trade slightly outside the money: Buying September $202.50 call options and selling September $212.50 call options for a total of about $4 per spread at the time of the trade. That represents a bet that Visa could rise between 2% and 7% above its Tuesday closing price by mid-September.
Visa shares were up more than 1% in premarket trading Wednesday.
Disclosure: Ascent Wealth Partners owns shares of Visa.