Our 12-month target price of $10.00 for WU considers the weighted-average of our P/E and DCF analyses.

P/E Analysis: We discount the P/E range for a set of comparables due to Western Union’s transitional state and near-term growth trends and arrive at a ~5x-8x target P/E multiple range. We use the lower part of the range and our 2026 EPS estimate of $1.84 to reach our ~$9.50 P/E fair value for WU. The multiple range also reflects the relatively lower growth Western Union has tended to display historically as well as the level of regulatory, political, and perceived cyclical risk inherent in the business model. We also acknowledge a level of execution and transitional risk given the ongoing strategy reorientation, and temporary changes in migration patterns that may be impactful.

Discounted Cash Flow (DCF) Analysis: Based on our ten-year DCF analysis, we derive an approximately $12.00 DCF fair value for WU. Our analysis incorporates the following assumptions: Weighted Average Cost of Capital (WACC) of ~7% (calculated), based upon a Beta of ~1 (Citi estimate), a Risk-Free Rate of ~4.5% (Citi estimate) and a Market Risk Premium of ~4% (Damodaran); Terminal Growth Rate of (2%)-(1.5%), which helps capture the long-term risk of competitive displacement.

The key risks to our target price on WU are:

(1) Business improvement execution and timeframe
(2) Faster-than-anticipated decline in the retail business
(3) Unfavorable macroeconomic, migration, and geopolitical trends
(4) Competition and emerging technologies
(5) Regulatory (costs of both compliance and non-compliance)
(6) Foreign currency exchange rate fluctuations
(7) Changes in valuation methods and market conditions
(8) Miscellaneous risks (i.e. tax rate fluctuations, natural disasters, cyber security, etc.)

If the impact on the company from any of these factors proves to be greater than we anticipate, the stock will likely have difficulty achieving our target price. However, should they be less than anticipated, the stock could trade above our target price.