By Nate Wolf

The transition from cash to cards has plenty of runway ahead even though consumers are living in an increasingly digital world, Mizuho Securities says. That is positive news for Visa.

Analyst Dan Dolev upgraded Visa to Outperform from Neutral in a research note Thursday, shrugging off concern that the uptake of cards is close to peaking. He raised his target for the stock price to $425 from $368, a call that implies a gain of 15% from the closing price on Wednesday.

Consensus estimates place the share of U.S. consumer spending that take place with a card at between 80% and 90%, but Dolev believes that the penetration rate is closer to 75%. He said it is set to rise.

"We see more reason for optimism as the remaining cash-to-card runway in the US is longer than previously expected," Dolev wrote. "This leaves room for another decade of solid top-line growth domestically."

Visa shareholders could be forgiven for thinking U.S. consumers had already finished the transition to paying with cards. Growth in transaction volumes at the card company outperformed the increase in personal consumption expenditures (PCE) by 5 to 7 percentage points in the years leading up to the Covid-19 pandemic and 10.5 percentage points in 2021. But that number declined to 2.4 points in 2022 and 0.8 points in 2023, fueling fears that the U.S. "has neared the ninth inning of card penetration," as Dolev put it.

Dolev, however, pinned that slowdown on a temporary shift in spending patterns. After the pandemic hit, PCE growth in categories with low card penetration, such as telecom services and utilities, was faster than in categories with high card penetration, such as food and retail. Dolev sees this trend starting to unwind.

It isn't as if Visa will hit a wall in the U.S. once more consumers have adopted cards, either. In Canada and Scandinavia, where estimated card penetration is 90% or higher, Visa continues to grow by outcompeting domestic payment networks, capturing small-business spending, and forming partnerships with digital-wallet and cryptocurrency providers.

This success in challenging markets "should help alleviate concerns of softer growth once markets reach near-full penetration," Dolev argued.

Mizuho's $425 price target is now one of the highest on Wall Street and significantly above the $387.75 average among analysts surveyed by FactSet. Most Visa watchers remain bullish on the stock, with five other analysts reiterating Buy ratings over the past week.

In an otherwise tricky fintech space, card companies could be a strong bet, analysts at Truist Securities argued in a note earlier this week. "If you want to sleep soundly at night, buy arguably the highest-quality duopoly in the world," the Truist analysts wrote, referring to Visa and Mastercard.

Visa shares were up 0.6% to $370.11 on Thursday, while Mastercard stock was also up modestly.

Write to Nate Wolf at nate.wolf@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

June 05, 2025 12:29 ET (16:29 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.