Shares of The Western Union Company (NYSE: WU) rallied 25% after the company reported strong third-quarter earnings and hosted a positive investor day Sept. 24.
While the company’s long-term revenue and earnings growth outlook have improved, its near-term prospects remain unchanged, according to Guggenheim Securities.
After the stock rallied and reached the prior price target of $28 Monday, the risk-reward appears balanced, Cantwell said in a Tuesday downgrade note. (See his track record.)
Western Union seems poised to generate double-digit earnings growth every year between 2020 and 2022, backed by strong revenue growth and expansion in firmwide adjusted operating margin, the analyst said.
Guggenheim is optimistic on the company’s strategy of offering its payments platform to financial institutions and consumer-facing companies via white-label partnerships providing new revenue streams over time, he said.
Western Union made a “firm commitment to drive expansion in the company's adjusted operating margin” from the current level of around 20% to 23% over three years, Cantwell said, adding that he expects investors to “increasingly appreciate this dynamic over time.”
Western Union shares were down 2.5% at $26.66 at the time of publication.