[Updated 11/01/2021] Western Union company update
The actions of the Western Union Company (NYSE: WU) is currently trading at nearly $ 19 per share, around 34% below its pre-Covid-19 peak. WU, a global leader in cross-border money movement and payment services, saw its shares trade just above $ 28 in February 2020 just before the outbreak of the pandemic, and is still nearly 34% below of this level. The stock is on par with the March 2020 lows, compared to the S&P 500 which more than doubled (up 105%) during that time frame. The easing of lockdown restrictions and the rapid Covid-19 vaccination program have allowed economic activity to recover to a large extent. The same is true of the improvement in WU’s trading volumes in recent quarters. Notably, Western Union Company revenues for the first half of 2021 grew 8% year-over-year to $ 2.5 billion. That said, revenue was still 7% lower than half-year revenue in 2019. In addition, WU is expected to post total revenue of around $ 1.32 billion in the third quarter (according to consensus estimates) – in 6% year-on-year increase. This will allow first nine months revenue to reach $ 3.8 billion, which is still 4% below the 2019 figure. This slow recovery in revenue is the main reason for negative investor sentiment towards the stock.
Returning to pre-Covid level means WU stock will need to increase 53% from here. We believe a full recovery is possible in the short term, once transaction volumes return to pre-Covid-19 levels. The company is heavily dependent on the consumer-to-consumer division, which contributed almost 90% of total turnover. It generates most of its business from offline points of sale. The revenue stream suffered in 2020 due to restrictions related to Covid-19 and the economic downturn. On the other hand, the company has seen a significant increase in the number of digital transactions, as the Covid-19 crisis has resulted in a shift in customer focus to digital. Although transaction volume improved in 2021, it is still below pre-Covid-19 levels. We expect the economic recovery to boost trading volumes in the coming quarters. Overall, this will likely help the WU stock generate around 53% upside in the near term, making it a good investment opportunity.
Our conclusion is based on the detailed comparison of Western Union Company actions during the 2008 recession versus now in our dashboard analysis.
[Updated 09/30/2021] Will Western Union Company shares return to pre-Covid level?
The actions of the Western Union Company (NYSE: WU) is currently trading at $ 21 per share, around 27% below its pre-Covid-19 peak. The world leader in money movements and payment services, WU saw its shares trade just above $ 28 in February 2020 just before the outbreak of the pandemic and is still nearly 27% below that level. The stock has gained 12% from its March 2020 lows against the S&P 500 which nearly doubled during that time. The easing of lockdown restrictions and the successful rollout of vaccines have boosted economic activity, leading to increased transaction volumes, especially in the consumer-to-consumer segment. This is also evident from the growth of Western Union Company revenues In recent quarters, half-year revenue grew 8% year-on-year to $ 2.5 billion. Despite this, the stock underperformed the broader index. Negative investor sentiment is driven by the slow recovery in revenue and transaction volumes from retail outlets in the consumer-to-consumer segment, which is still below pre-Covid-19 levels.
Returning to pre-Covid level means WU stock will need to increase 36% from here. We believe that an increase is possible in the short term, once transaction volumes return to pre-Covid-19 levels. The company’s consumer-to-consumer segment, which generates nearly 87% of its revenue, saw a 3% year-on-year decline in 2020. This was mainly due to lower demand and restrictions. related to Covid-19, primarily affecting its retail business. Locations. That said, it was partially offset by a 38% year-on-year growth in WU digital money transfer revenue, driven by an 81% increase in digital transactions. Gradually improving economic conditions and easing foreclosure restrictions are expected to increase transaction volumes at retail outlets. All in all, this will likely help WU’s turnover and cause the stock to rise about 36% in the short term, making it a good investment opportunity.
But pre-Covid levels can only be reached once WU’s physical point-of-sale transaction volumes improve or digital payment growth compensates for lost revenue. In addition, it is also important that the economic recovery is not hampered by a sudden increase in Covid-19 cases. Our conclusion is based on the detailed comparison of Western Union Company actions during the 2008 recession versus now in our dashboard analysis.
Timeline of the Covid-19 crisis so far:
- 12/12/2019: Coronavirus cases first reported in China
- 01/31/2020: WHO declares global health emergency.
- 02/19/2020: Signs of effective containment in China and hopes of monetary easing from major central banks help S&P 500 reach record high
- 03/23/2020: S&P 500 34% drop from the peak level seen on February 19, 2020, as COVID-19 cases accelerate outside China. It doesn’t help that oil prices collapse in mid-March amid the Saudi-led price war
- Since 03/24/2020: S&P 500 recovers 95% from the lows seen on March 23, 2020, with the Fed’s multibillion-dollar stimulus package keeping the economy afloat during the extended lockdown and the vaccination campaign allowing things to gradually return to near-normal conditions despite several waves of Covid infections.
In contrast, here is how WU stock and the broader market behaved during the 2007/2008 crisis.
Timeline of the 2007-08 crisis
- 10/01/2007: Approximate pre-crisis peak of the S&P 500 index
- 09/01/2008 – 10/01/2008: Accelerated market decline corresponding to Lehman’s bankruptcy filing (09/15/08)
- 03/01/2009: Approximate low point of the S&P 500 index
- 12/31/2009: Initial recovery to pre-accelerated decline levels (around 9/1/2008)
Performance of the WU and S&P 500 during the 2007-08 Crisis
We find that WU’s stock has gone from levels over $ 21 in September 2007 (pre-crisis peak) to levels around $ 11 in March 2009 (as markets bottomed out), this which implies that WU stock has lost 47% from its approximate pre-crisis peak. It recovered from the 2008 crisis, to levels above $ 19 in early 2010, increasing 69% between March 2009 and January 2010. The S&P 500 Index fell 51% from levels from 1,540 in September 2007 to 757 in March. 2009. It then rebounded by 48% between March 2009 and January 2010 to reach levels of 1,124.
Fundamentals of WU in recent years
The Western Union Company’s revenue declined from $ 5.5 billion in 2017 to $ 5.3 billion in 2019, mainly due to the sale of a substantial majority of its electronic bill payment services to consumers. United States. However, net income fell from – $ 557.1 million to $ 1.1 billion over the same period, due to lower operating expenses and the gain on business disposals. Additionally, the company’s revenue fell in 2020, reaching just $ 4.8 billion, due to the impact of the Covid-19 crisis. WU reported basic EPS of $ 1.81 per share for the year.
Does WU have enough cash to meet its obligations during the coronavirus crisis?
The Western Union Company’s total debt edged up from $ 3 billion in 2017 to about $ 3.1 billion in 2020, while its total cash flow fell from about $ 0.8 billion to $ 1.0 billion. $ 4 billion over the same period. In addition, the company reported a cash outflow of $ 113.4 million from investing and a cash inflow of $ 877.5 million from operating activities. Overall, the company has a strong cash flow from operations and a comfortable cash cushion to meet its short-term obligations.
Phases of the Covid-19 crisis:
- Beginning to mid-March 2020: Fear of the rapid spread of the coronavirus epidemic is reflected in reality, the number of cases accelerating in the world
- End of March 2020: social distancing measures + confinements
- April 2020: Fed stimulus suppresses short-term survival anxiety
- May-September 2020: Resumption of demand, with the gradual lifting of blockages – no more panic with the number of cases seeming to have reached a plateau
- October 2020-February 2021: unprecedented surge in Covid cases force a new round of lockdowns across the country
- Since March 2021: In progress vaccination campaign and the gradual reopening leads to a demand improvement – strong market sentiment
Despite an increase in the number of new cases of Covid-19 in the United States, we expect a gradual improvement in demand to support market expectations. As investors focus on the expected results for the year 2021 and 2022, we believe that the stock of The Western Union Company has the potential to recover completely once fears surrounding the Covid pandemic are allayed.
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