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Investing.com -- HSBC upgraded Visa and Mastercard to Buy, saying both companies’ share underperformance has created an attractive entry point as strong services growth supports a durable earnings outlook.

Visa and Mastercard shares have trailed the S&P 500 by 22 to 26% in the past six months and are on track to lag the market in 2025, which would be only the fourth like that since their IPOs.

Both stocks now trade at discounts to their own histories and at unusually narrow premiums to the broader index.

"Valuations/strong financial performance underpin our more positive stances on Visa and Mastercard," analysts at HSBC said. 

"Attractive financial algorithm remains intact as services generate outsized growth"

HSBC raised its price target on Visa to $389 from $335 and lifted Mastercard’s target to $633 from $598.

Continued double digit revenue and earnings growth is supported by fast expanding value added services, which is about 30% of Visa revenue and makes up for 40% at Mastercard.

HSBC expects these businesses to keep growing at mid to high teen rates, providing a lift to overall revenue even if core payments growth slows.

For Visa, HSBC forecasts about 10% annual net revenue growth and low double digit EPS growth through 2027, saying the company’s services and commercial payments units offer meaningful long term upside. The bank said it has a slight preference for Visa given its lower multiple.

HSBC said Mastercard should deliver low double digit revenue and mid teen EPS growth despite the drag from Capital One’s debit migration, helped by strong services demand and faster growth in non US markets.

Concerns over new payment technologies, regulation and domestic schemes have weighed on the stocks, but it remain at odds with consistent performance and the companies’ ability to broaden revenue beyond traditional network fees.

Investing.com -- IBM announced Monday that it will acquire Confluent Inc. (NASDAQ: CFLT) for $31 per share in cash, representing an enterprise value of $11 billion.

According to Jefferies in a note just prior to the confirmation, the company is a “strategically sound fit.”

The deal is expected to mark IBM’s largest acquisition since its $34 billion purchase of Red Hat in 2019 and reinforce a strategy centered on “software reacceleration.”

Jefferies analyst Brent Thill wrote that Confluent represents an “attractive technology asset in data streaming,” whose growth could be amplified under IBM’s broader distribution and deep partner ecosystem, including Red Hat, watsonx and IBM Consulting. 

The combination, Jefferies said, would extend IBM’s software stack into “real-time data streaming and unlock cross-sell opportunities” by pairing Confluent’s managed Kafka service with IBM’s automation and security products.

The firm emphasized the strategic rationale, arguing that real-time event streaming, Confluent’s specialty, addresses “one of the most critical pain points in modern enterprise architectures.” 

Jefferies stated that these capabilities will complement IBM’s hybrid cloud and AI-first strategy by providing a robust data movement layer that accelerates AI adoption and operational intelligence across environments.

From a valuation standpoint, Jefferies wrote: “The proposed $11B deal value implies an 8.5x EV/NTM sales takeout multiple for CFLT, a 2-turn premium to the average takeout multiple of the comparable transactions but a ~1.5-turn discount to HashiCorp’s takeout multiple.”