Western Union: Improving On Digital Money Transfers
Valued @$4.4B or $13 per share
Western Union's revenue mix shifted, with Consumer Money Transfer declining and Consumer Services growing, partly driven by digital infrastructure investments.
I estimate that expansion into new corridors like the U.S. to Guatemala and the U.K. to India will capture $505M in annual revenue over time.
I estimate that the changes to the U.S. immigration approach will impact revenues by $300M in 2025. On net, I forecast that WU will produce $4B revenues in 2025.
In my view, the WU stock is oversold. Stabilizing operations and strategic growth leads to an intrinsic value of $4.4B or $13 per share.
WU will increase in value as it incrementally de-risks its business, and the market will start ascribing a lower 8% required return to the stock.
The company is projecting up to 4.19B revenues in 2025, a 20% operating margin and $1.64 in EPS, implying a net income around $550M. At a 90% free cash flow conversion ratio, it means that WU can support dividends and buybacks of $500M from operations. This is roughly consistent with the latest $318M in dividends and $177M in buybacks returned to shareholders.
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Full article: https://seekingalpha.com/article/4756412?gt=57b4c80fd8050475
I also recently published an analysis on Wise, WU’s competitor:
Taken together, it seems that investors may be able to diversify away some of the risk of these companies.