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Visa Stock Up Nearly 9% in a Month: Is Now the Right Time to Invest?
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Visa Inc. (V - Free Report) , a leading player in the payments industry, continues to exhibit strong fundamentals that suggest potential for long-term growth, driven by its expanding network. The company has seen its shares rise 8.6% in the past month, outpacing the industry’s 8.1% growth. The company’s unmatched scale and operational prowess have also helped it outperform the S&P 500’s return of 5.9%.
Moreover, the stock is trading above its 50-day and 200-day moving averages, indicating solid upward momentum. Visa's reliable and profitable business model is well-positioned to manage challenges, such as slowing spending growth in high-ticket items, and maintain its upward trajectory.
V’s One-Month Price Performance
Image Source: Zacks Investment Research
What’s Driving Visa?
The high-spend consumer segment is expected to witness stable growth. In contrast, the lower-spend consumer group is likely to reduce spending, particularly on high-ticket and discretionary items, due to dwindling savings. Despite these investor concerns, global cashless payment volumes are expected to rise as economies continue to drive digital adoption.
Visa, with its massive size ($511.1 billion market cap), market shareand extensive network, is well-positioned to benefit from the growing volumes. Even if the company's fee income faces short-term pressure from the headwinds in spending growth, its expanding partnerships, value-added services, robust network and healthy margins are likely to ensure its resilience and sustained growth.
Visa's cryptocurrency initiatives and digital wallet products are expanding its network by attracting more consumers and businesses. Its investments in advancing cybersecurity and fraud prevention enhance its appeal to both consumers and merchants, making it a safer option in the payment space. With the rise in fraudulent activities, these security-focused services are increasingly in demand, positioning Visa to attract more clients who prioritize secure transactions.
Visa's strong profitability enables it to consistently enhance shareholder value. In the last reported quarter, it returned $5.83 billion to shareholders through share buybacks ($4.77 billion) and dividends ($1.06 billion). The company had $18.9 billion remaining under its repurchase program as of June 30, 2024. With a dividend yield of 0.75%, Visa is ahead of the industry average of 0.72%.
Image Source: Zacks Investment Research
Visa’s market penetration and efforts to strengthen its footprint in developing economies are expected to bolster its transaction volume. Payment transaction growth from regions like Latin America and CEMEA is likely to offset lower growth from the Asia Pacific region and support its bottom line. These factors contribute to its positive earnings growth projections.
Estimates for V & Surprise History
The Zacks Consensus Estimate for current-year adjusted earnings for V is currently pegged at $9.92 per share, indicating 13.1% year-over-year growth. The consensus mark for next year suggests a further 11.7% jump. The consensus estimate for fiscal 2024 and 2025 revenues suggests 9.6% and 9.9% year-over-year growth, respectively. It beat earnings estimates in each of the past four quarters with an average surprise of 2.9%. This is depicted in the figure below.
V’s business may face some regulatory hurdles, which can affect its growth in the short run. Ongoing legal battles and potential lawsuits might lead to financial liabilities and heightened competition. The Credit Card Competition Act of 2023 aims to introduce more competition in the credit card network market and lower merchant costs, which could impact Visa's growth trajectory.
The act targets major players like Visa and Mastercard Incorporated (MA - Free Report) , aiming to reduce their market dominance (outside the Eastern Hemisphere, where UnionPay holds a significant share).
Visa’s fiscal third-quarter revenues failed to impress investors. Although net revenues improved 10% year over year to $8.9 billion, it missed the Zacks Consensus Estimate by 0.1%, a rare feat for the payments juggernaut.
Is Visa Overvalued?
From a valuation perspective, Visa appears relatively expensive, which may constrain short-term gains and make it less appealing compared to other investment opportunities. Going by its price/earnings ratio, the company is trading at a forward earnings multiple of 25.32X, higher than the industry average of 22.68X.
Image Source: Zacks Investment Research
In comparison, its peer, American Express Company (AXP - Free Report) , is trading cheaper at 17.57X, while Mastercard is costlier at 30.14X.
Don’t Rush to Buy Visa Stock Now
Visa's dominant market position and financial stability make it an attractive stock to retain for current investors. The increasing shift toward cashless payments is expected to enhance Visa's expanding network, while its shareholder-friendly initiatives, cybersecurity investments and impressive profitability add to its appeal.
However, prospective buyers may consider waiting for a more favorable entry point due to the stock's elevated valuation and keep an eye on the ongoing regulatory challenges. Additionally, monitoring consumer spending trends is essential, as these trends reflect the overall health of the economy and have influence over Visa's revenues from transaction fees.
Image: Bigstock
Visa Stock Up Nearly 9% in a Month: Is Now the Right Time to Invest?
Visa Inc. (V - Free Report) , a leading player in the payments industry, continues to exhibit strong fundamentals that suggest potential for long-term growth, driven by its expanding network. The company has seen its shares rise 8.6% in the past month, outpacing the industry’s 8.1% growth. The company’s unmatched scale and operational prowess have also helped it outperform the S&P 500’s return of 5.9%.
Moreover, the stock is trading above its 50-day and 200-day moving averages, indicating solid upward momentum. Visa's reliable and profitable business model is well-positioned to manage challenges, such as slowing spending growth in high-ticket items, and maintain its upward trajectory.
V’s One-Month Price Performance
What’s Driving Visa?
The high-spend consumer segment is expected to witness stable growth. In contrast, the lower-spend consumer group is likely to reduce spending, particularly on high-ticket and discretionary items, due to dwindling savings. Despite these investor concerns, global cashless payment volumes are expected to rise as economies continue to drive digital adoption.
Visa, with its massive size ($511.1 billion market cap), market shareand extensive network, is well-positioned to benefit from the growing volumes. Even if the company's fee income faces short-term pressure from the headwinds in spending growth, its expanding partnerships, value-added services, robust network and healthy margins are likely to ensure its resilience and sustained growth.
Visa's cryptocurrency initiatives and digital wallet products are expanding its network by attracting more consumers and businesses. Its investments in advancing cybersecurity and fraud prevention enhance its appeal to both consumers and merchants, making it a safer option in the payment space. With the rise in fraudulent activities, these security-focused services are increasingly in demand, positioning Visa to attract more clients who prioritize secure transactions.
Visa's strong profitability enables it to consistently enhance shareholder value. In the last reported quarter, it returned $5.83 billion to shareholders through share buybacks ($4.77 billion) and dividends ($1.06 billion). The company had $18.9 billion remaining under its repurchase program as of June 30, 2024. With a dividend yield of 0.75%, Visa is ahead of the industry average of 0.72%.
Visa’s market penetration and efforts to strengthen its footprint in developing economies are expected to bolster its transaction volume. Payment transaction growth from regions like Latin America and CEMEA is likely to offset lower growth from the Asia Pacific region and support its bottom line. These factors contribute to its positive earnings growth projections.
Estimates for V & Surprise History
The Zacks Consensus Estimate for current-year adjusted earnings for V is currently pegged at $9.92 per share, indicating 13.1% year-over-year growth. The consensus mark for next year suggests a further 11.7% jump. The consensus estimate for fiscal 2024 and 2025 revenues suggests 9.6% and 9.9% year-over-year growth, respectively. It beat earnings estimates in each of the past four quarters with an average surprise of 2.9%. This is depicted in the figure below.
Visa Inc. Price and EPS Surprise
Visa Inc. price-eps-surprise | Visa Inc. Quote
Visa’s Hurdles to Watch
V’s business may face some regulatory hurdles, which can affect its growth in the short run. Ongoing legal battles and potential lawsuits might lead to financial liabilities and heightened competition. The Credit Card Competition Act of 2023 aims to introduce more competition in the credit card network market and lower merchant costs, which could impact Visa's growth trajectory.
The act targets major players like Visa and Mastercard Incorporated (MA - Free Report) , aiming to reduce their market dominance (outside the Eastern Hemisphere, where UnionPay holds a significant share).
Visa’s fiscal third-quarter revenues failed to impress investors. Although net revenues improved 10% year over year to $8.9 billion, it missed the Zacks Consensus Estimate by 0.1%, a rare feat for the payments juggernaut.
Is Visa Overvalued?
From a valuation perspective, Visa appears relatively expensive, which may constrain short-term gains and make it less appealing compared to other investment opportunities. Going by its price/earnings ratio, the company is trading at a forward earnings multiple of 25.32X, higher than the industry average of 22.68X.
In comparison, its peer, American Express Company (AXP - Free Report) , is trading cheaper at 17.57X, while Mastercard is costlier at 30.14X.
Don’t Rush to Buy Visa Stock Now
Visa's dominant market position and financial stability make it an attractive stock to retain for current investors. The increasing shift toward cashless payments is expected to enhance Visa's expanding network, while its shareholder-friendly initiatives, cybersecurity investments and impressive profitability add to its appeal.
However, prospective buyers may consider waiting for a more favorable entry point due to the stock's elevated valuation and keep an eye on the ongoing regulatory challenges. Additionally, monitoring consumer spending trends is essential, as these trends reflect the overall health of the economy and have influence over Visa's revenues from transaction fees.
The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.