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Mastercard Incorporated (MA) - free report >>
Visa Inc. (V) - free report >>
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Visa to Strengthen its Market Position, Despite Headwinds
On Jun 10, we uploaded our research report on Visa, Inc. (V - Free Report) , a leader in global payments.
The company, which already has a significant presence in the global payments market, is poised for a further upgrade in rank following its acquisition of Visa Europe. The buyout is scheduled to close this month.
Visa Europe will give Visa direct access to the very attractive European payments’ market, which was an early adopter of the mobile payments’ system. It will further boost Visa’s market position and give it an edge over global arch rivals like MasterCard Inc. (MA - Free Report) , American Express Co. (AXP - Free Report) and Discover Financial Services (DFS - Free Report) .
Fraud minimization is one of the main purviews of payment processing companies and Visa has achieved quite a feat in this regard. It is aggressively engaging itself in digitalization of payments which helps in reducing fraud. To this end, the company has launched the Visa Digital Commerce App., Visa Token Service, Visa Checkout and Visa Developer Platform. Also it is issuing chip installed cards using the EMV technology. More than 265 million Visa chip cards were issued as of Mar 2016. The chip in the cards reduces the chance of theft of card data.
No doubt Visa remains a leader in the payment processing industry. Yet the earnings of this company will feel the pressure of declining cross-border business volumes, continued low oil prices which are hindering payments volume growth and weakness in China over the coming quarters. Foreign exchange volatility, along with higher incentives, rebates and expenses will also mar overall growth.
Moreover, Visa has a solid financial position, with cash and cash equivalents of $15.9 billion as of Mar 31, 2016, up from $3.5 billion as of Sep 30, 2015, no debt and about $7 billion in free cash flow generation expected this year. We believe these characteristics make Visa well positioned to weather a potential economic or market downturn.
Currently, Visa carries a Zacks Rank #3 (Hold).
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