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Western Union selloff overdone

Recs

1

October 21, 2008 – Comments (1) | RELATED TICKERS: WU

Western Union posted good quarterly results today, meeting analyst expecations. They also withdrew their long-term guidance, which I guess has called the stock to sell off over 15%.

I think this is overdone. Business in the US-Mexico corridor is down, of course, as is growth in China and Europe. However, this is a global company. Growth in the Philippines and India is up and the company is still highly profitable. The network effect is the core of Western Union's moat. The more agents a transfer company has, the wider the moat, and competitors can't match WU's scale.

Also, immigrants will continue to work outside their home countries. It's true that Western Union's prospects are tied to the shape of the global economy, but it's not going to be in recession forever. I think there's a lot of growth left in its industry and that WU can grow through and after the recession.

1 Comments – Post Your Own

#1) On October 21, 2008 at 5:46 PM, UltraContrarian (31.93) wrote:

Counterpoints:

1. Negative tangible book.

2. Basically no earnings growth over the past few years.

3. Highish PE multiple.

4. No regular dividend.

Actually I think it is still slightly overpriced.

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