With Visa Inc (NYSE:V) and Mastercard Inc (NYSE:MA) set to report their quarterly earnings later this month, Wall Street is keenly observing the performance of these payment giants.

Visa reports Q2 earnings on July 23 and Mastercard reports on July 31. Both stock are down about 5% over the past three months.

Despite the recent downturn in their stock prices, JPMorgan analyst Tien-tsin Huang remains optimistic about their future, anticipating underlying stability and potential growth.

Visa, Mastercard's 'Concerns Reasonable', Says Analyst

Huang emphasizes that both Visa and Mastercard have faced a challenging operating environment over the past year. "We find these concerns reasonable," Huang notes, acknowledging issues around regulation, litigation, and market saturation.

However, he views the recent underperformance of the stocks as overdone, stating, "We continue to see both V/MA as best-in-class compounders with diversified medium-term growth opportunities."

Visa Expectations: Decelerated Growth but Stability

For Visa's upcoming earnings report on July 23rd, Huang expects volume growth to decelerate by approximately 1 percentage point from the previous quarter. He anticipates that Visa's management will describe the macro environment as stable, despite softer spending by lower-income cohorts.

"Overall, we expect F3Q results to be within guidance," Huang says, projecting 9% reported growth. While this is slightly below Street estimates, he believes that reiterating full-year guidance should suffice for the stock at its current levels.

Mastercard Expectations: Potential for Upside

Mastercard, set to report on July 31, is expected to perform slightly better. Huang projects that Mastercard's reported revenue will hit the high end or possibly exceed guidance.

"Relative to Visa, we see more upside potential to Mastercard's full-year guidance," Huang said, citing pricing and issuer wins in Europe and the U.S. as contributing factors.

He anticipates Mastercard to reiterate its FXN revenue outlook for this quarter, aligning with high-end LDD growth.

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Pre-Earnings Data and Adjustments

Analyzing pre-earnings data, Huang notes a slight deceleration in card volume trends for major issuers like Bank of America (NYSE:BAC) and JPMorgan Chase (NYSE:JPM). He also observes modest deceleration in cross-border volume for Visa and Mastercard.

Consequently, Huang has adjusted his estimates, lowering growth projections for both companies. Despite these adjustments, he remains confident in their stability and long-term prospects.

Huang highlights the resilience and growth potential of Visa and Mastercard amid a fragile operating environment. He acknowledges the current sentiment but maintains a positive outlook, particularly for Mastercard, as both companies continue to leverage their strengths to navigate regulatory and macroeconomic challenges.

As earnings reports approach, investors will be closely watching to see how these payment titans perform and whether they can exceed expectations.

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