I'm reiterating my Buy rating for Western Union (NYSE: WU), first recommended on July 9, 2009 at a price of $16.49. If you bought WU then, you're up about 20%.The July call confirmed an earlier calculation that pointed to a decent 4-7% revenue gain in FY2010 for Western Union.
In short, the worst appears to be over for the money transfer giant: the long period of large job losses in the developed appears to be over, which is good news for WU. Meanwhile, cost controls remain good, and gross margins are adequate. The First Call FY2009/FY2010 EPS estimates for WU are $1.27 to $1.40.
Technically, Western Union's stock chart is strong: an uptrend since March, with the stock consistently above the 50-day moving average. In June, the stock also recorded a golden cross -- in which the 50-day moving average crosses above the 200-day moving average, another bullish sign. There will be psychological resistance at $20, but given WU's revenue growth potential, $20 will likely prove to be a pit stop.
Stock Analysis: Western Union Co. is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in WU now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your WU position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $9.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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