| Snowflake Score | |
|---|---|
| Valuation | 5/6 |
| Future Growth | 3/6 |
| Past Performance | 6/6 |
| Financial Health | 4/6 |
| Dividends | 0/6 |
V Stock Overview
Visa Inc. operates as a payments technology company worldwide.
Rewards
Analysts in good agreement that stock price will rise by 41.6%
Risk Analysis
No risks detected for V from our risk checks.
Visa Inc. Competitors
Price History & Performance
| Historical stock prices | |
|---|---|
| Current Share Price | US$181.65 |
| 52 Week High | US$236.96 |
| 52 Week Low | US$174.83 |
| Beta | 0.90 |
| 1 Month Change | -8.15% |
| 3 Month Change | -9.42% |
| 1 Year Change | -19.17% |
| 3 Year Change | 3.86% |
| 5 Year Change | 69.75% |
| Change since IPO | 1,186.02% |
Recent News & Updates
Visa: High Price Multiples Are Likely Not A Problem
Summary If over the past 10 years we had relied on multiples analysis, we probably would never have bought Visa. The current multiples while not that low by the standards of fundamental analysis, signal an undervaluation compared to those of the past. There is arguably no company in the world that has better FCF margin than Visa among those that produce an annual free cash flow of at least $3 billion. The global payments system has huge barriers to entry, which is why Visa's competitive advantage is very pronounced. Multiples with too high nominal values compared to the canons of fundamental analysis are often an indication of overvaluation for a company, but not for Visa (V). When analyzing this company some of the metrics of fundamental analysis are misleading, and in this article I will explain why Visa cannot be evaluated as if it were any other company. Back testing If over the past 10 years we had relied on multiples analysis, we probably would never have bought Visa. In 2012 Visa was trading at a P/E of 47.31x, a P/S of 9.59x and an EV/EBITDA of 15.08x. Revenue growth over the next 10 years was about 10.80% CAGR. These do not sound like exciting multiples when compared to the growth, yet Visa has since then achieved a return of 618.90% versus 189.03% for the S&P500. TradingView In 2015, Visa had a P/E of 30.06x, a P/S of 13.46x, and an EV/EDITDA of 18.88x. The revenue CAGR was about 11.1% from 2015 to the present. Under these assumptions Visa would once again be considered overvalued relative to the market, yet the performance achieved says otherwise. TradingView 176.53% for Visa versus 78% for the S&P500. Finally, in 2018 Visa had a P/E of 29.85x, a P/S of 14.07x, and an EV/EBITDA of 21.20x. From 2018 to the present, revenues have grown by about 9% CAGR. Again, based on the nominal value of price multiples, Visa was overvalued. After all, we are talking about a company trading at a P/E of almost 30x and with a growth rate of less than 10%. Yet, once again Visa outperformed the market. TradingView Visa's return since 2018 has been 52% while that of the S&P500 has been 34%. Why Visa continues to outperform the market even at such high multiples One of the generally accepted market rules is that you have to pay more for something that in the collective imagination is worth more. In the stock market, the same principle applies, and it all translates into higher price multiples. Typically there are three characteristics that lead a company to have higher multiples than the market: Its profitability. Leadership within the underlying market. Expectations of growth potential. If a company has excellent margins, it is likely fair that we should expect to pay more, as should we expect this for an industry leader or one with a high growth rate. With reference to these parameters, Visa's position will now be analyzed to demonstrate why it deserves to trade at higher market multiples. Profitability Visa's profitability is certainly its greatest strength. There is no company in the world that I've found that has better FCF margins than Visa among those that produce an annual free cash flow of at least $3 billion. The only company that comes close in terms of net income margin and free cash flow margin is its rival Mastercard (MA), but even here the comparison is unequal. TIKR terminal As can be seen from this chart, Visa has higher profitability in terms of net income and free cash flow margin over multiple time frames. This comparison is not meant to put Mastercard in a bad light (which by the way also has outlier margins), but to put Visa's profitability in context to its main competitor. Beyond Mastercard there is no company that can sustain this comparison, not least because the payment services industry in which they both operate already has much higher-than-average margins. Comparing Visa's profitability with top companies in other industries such as Apple (AAPL), Microsoft (MSFT), and Alphabet (GOOG) (GOOGL) would be no match anyway. Except for Visa, no company in the world consistently manages to generate at least $50 in free cash flow for every $100 in revenue. In light of these considerations, this is the first reason why I think this company deserves to trade at higher multiples. If you want to become a shareholder in a company with impressive profitability margins, you have to pay more. Leadership In the global payment services market, Visa presents undisputed leadership. nilsonreport.com Considering the 2021 purchase volume in the U.S., Visa has a 62% market share with about $5.21 trillion. Mastercard is in second place with 26% and a purchase volume of $2.18 trillion. Visa and Mastercard combined have an 88% market share in U.S. purchase volumes, effectively demonstrating that their position can be associated with that of a duopoly. The global payments system has huge barriers to entry, which is why Visa's competitive advantage is very pronounced. To best explain this concept I think it is useful to give an example. Assume that company X wants to compete against Visa and places its own payment system within the market. What merchant would use a payment system without a track record of reliability and speed? What user would use this service if there were no merchants willing to accept it as a payment system? Creating a global network that can channel within it agreements with banks, merchants, companies, and a large customer base is extremely complex, especially when there are already companies offering a more than satisfactory service. In this market, trust is one of the most important aspects and cannot be obtained overnight. If you were the owner of a store, which payment system would you accept between Visa, a certainty in terms of quality and spread, and the one just created by company X? The answer is why I believe a company with such a competitive advantage should be traded at higher price multiples than the market. Growth potential Visa's future growth potential is quite high given that it is a leading company in its industry and with a market cap of $380 billion. In Q3 2022, there were signs of a slowdown from the growth achieved in Q3 2021, but it was overall a good quarter. One must take into consideration that the current macroeconomic scenario and last year's scenario are completely different. Visa Q3 2022 The payment volume of Q3 2022 increased by 8% compared to Q3 2021 in nominal terms and by 12% not considering the strengthening of the dollar. Visa Q3 2022 In addition, Q3 2022 net revenues achieved 19% growth over Q3 2021, a positive result considering the current recessionary context. The most promising segment is international transactions, which recorded a strong growth of 51%. From a long-term perspective, Visa is increasing its influence in key countries such as Brazil and especially India. Underlying Visa's steady growth is primarily the increasingly less frequent adoption of cash as a payment method. Developed countries are trying year after year to reduce the use of cash in favor of digital payments, both to encourage better payment efficiency and to combat tax evasion. There are still many countries that still favor cash, such as Italy, but the long-term trend is still toward a cashless society. On that note, we can look at this interesting graph below where we see the expected growth in cashless transactions through 2025. paymentscardsandmobile.com The total volume of cashless transactions is expected to reach $1.84 trillion, registering a CAGR of 18.60% in the 2020-2025 time frame. Companies like Visa can only benefit from this inevitable transition. As for Visa's FCF growth estimates, let's look at what analysts predict. stockforecast.com Analysts at Stock Forecast estimated Visa's free cash flow to be $33.35 billion by 2030, registering a 10.27% CAGR. Considering a shorter time frame instead, free cash flow of $24.23 billion is expected by 2026, registering a 12.46% CAGR. TIKR Terminal In contrast, analysts at TIKR Terminal estimated free cash flow of $24.63 billion by 2026, a 12.15% CAGR. In both cases the analysts still estimate double-digit annual growth for Visa, so there is still significant room for improvement.
Here's Why Visa (NYSE:V) Has Caught The Eye Of Investors
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Visa, GM Sectec bolster alliance in fraud prevention, cyber defense in Latin America
Visa (NYSE:V) and GM Sectec, a firm specializing in cybersecurity, have strengthened their alliance to improve fraud prevention, cyber defense, and cybersecurity best practices in the Latin America and Caribbean region, the companies said Wednesday. As a result, Visa's (V) Cybersource unit will offer payment and risk management services supported by GM Sectec's cybersecurity expertise. The expanded alliance comes after online commerce surged during the pandemic, leading to an increased number of cyber-attacks and highlighting the need to reinforce security of digital transactions, the companies said. "Partnerships like this one, enables us to continue to innovate in solutions that provide buyers and sellers with increasingly secure, convenient, and frictionless payment experiences, both online or physically at the point of sale," said Eduardo Perez, chief risk officer for Visa in Latin America and the Caribbean. GM Sectec, a cyber defense and managed security services provider, was founded in 1970 as General Computer Corporation and later as GM Group in the 1990s. In May, Mastercard (NYSE:MA) launched the Cyber Front attack simulation and assessment platform
Visa (NYSE:V) Has A Rock Solid Balance Sheet
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Visa: You Probably Have One In Your (Digital) Wallet
Summary The Visa stock has been one of the most resilient amid this year's market selloff. On a fundamental basis, the company has continued to expand market share by capitalizing on accelerating cash digitization opportunities while also benefiting from the post-pandemic recovery narrative. The following analysis will explore opportunities spanning from each of Visa's three core growth engines, as well as offsetting risks to be aware of in the near-term. Visa (NYSE:V) has demonstrated resilience against ongoing cyclical headwinds, with the stock outperforming broader market performance this year and its fundamentals exhibiting positive momentum in post-pandemic recovery. Investors’ confidence in the stock has been buoyed by Visa’s recent demonstration of increased visibility into its post-pandemic recovery trajectory despite growing uncertainties on the global economic outlook: The last thing I would say is that it is very possible that today, people are changing what they're buying, but they're not changing how they're paying. And we fall into the latter category. And we see overall spending levels, as we talked about remaining high, and we continue to see people choosing to pay with Visa not depending on any change that they might be making in what they're buying or the baskets that they have. Source: Visa F3Q22 Earnings Call Transcript Although record-high price pressures this year have reduced consumer spending power, and inadvertently, pushed consumer sentiment to all-time lows this summer, Visa payment volumes have bucked the trend, citing observations of strong retail spending with resilience expected to last through the remainder of calendar 2022. In the near-term, the company is also well-positioned to benefit from significant growth headroom in the continued recovery of higher-margin cross-border travel payment volumes stemming from gradual easing of COVID restrictions in the APAC region. And over the longer-term, as the payments processing pioneer embarks a multi-year cycle of renewed growth on the back of accelerating cash digitization trends, with prospects of sustained market share gains anchored by its “network of networks” advantage while benefiting from a high-margin business model through scale across its core growth drivers, Visa remains a compelling investment at current levels. Capturing the Cash-to-Digital Trend in Consumer End-Markets One of Visa’s core growth drivers is consumer payments, which is becoming increasingly digital with accelerated e-commerce adoption coming out of the pandemic. Global online purchases today already represent about a fifth of total retail spending, with volumes expected to exceed $5.5 trillion by the end of the year. And with “trillions of offline retail dollars moving online over the much longer-term”, global payment volumes stemming from e-commerce are expected to top $7 trillion by mid-decade and represent a quarter of retail sales worldwide. The increased share of omnichannel retail is expected to draw renewed growth in digital payment demand amid consumers over the longer-term. Debit and credit card spending has transitioned from a convenient and accessible form of physical payment, to now an essential in facilitating the shift in consumer behaviour with digital transformation. And the pandemic has played a critical role in accelerating this transition. More than three-quarters of adults worldwide now have access to a financial services account, up from merely 50% from ten years ago, with much of it driven by “the use of digital payments, which surged during COVID-19 mobility restrictions and when cash was perceived as unsanitary”. This accordingly underscores an extended trajectory of renewed growth for Visa, as it capitalizes on the next generation of consumer demand for digital payments. And this is further corroborated by Visa’s track towards double-digit payments volume growth in the current fiscal year, extending momentum observed in fiscal 2021 despite the pullback in pandemic-era economic accommodations such as stimulus payments. The company has demonstrated strong resilience against current cyclical headwinds. As mentioned in the earlier section, consumer spending has continued to grow beyond pre-pandemic trends, despite the broad-based decrease in spending power due to forty-year-high inflation and near-term economic tightening. In addition to secular growth stemming from cash digitization trends, another core driver of Visa’s momentum remains in cross-border volumes (ex-intra-Europe) which continues to benefit from the post-pandemic recovery narrative. Based on recent operating performance metrics released by Visa, “total cross-border volume grew 45% in July and 36% in August, which is 134% of 2019 levels in both months”, buoyed by continued easing in mobility restrictions across European and APAC regions. With Japan – one of the few APAC regions still under strict pandemic-induced mobility restrictions – now increasing its “daily entry cap” from 20,000 visitors to 50,000 visitors beginning this month and potential plans to scrap the limit altogether by November, Visa is well-positioned to benefit further from related outbound travel cross-border volumes, which generate higher-margin fees charged per swipe. And with China inbound and outbound cross-border volumes still “indexing below 25% of 2019 and below 40% of 2019 levels”, respectively, there is further visibility into Visa’s long-term growth and margin trajectory stemming from the global post-pandemic recovery narrative. Unlocking New TAM with Visa’s Sprawling “Network of Networks” Business Model Another core growth engine at Visa is new flows, which refers to the company’s increasing capitalization of opportunities outside of traditional consumer payments. With the future of transactions becoming increasingly digital, Visa’s vast network of customers spanning issuers, acquirers, merchants and consumers has created an “opportunity to capture new sources of money movement through card and non-card flows”. Under Visa’s “network of networks business model”, the company leverages its industry-leading scale in digital payment solutions to further reach and capitalize on opportunities stemming from digital peer-to-peer (“P2P”), business-to-consumer (“B2C”), business-to-business (“B2B”), business-to-small-businesses (“B2b”) and government-to-consumer (“G2C”) transactions – a combined addressable market worth $185 trillion or “4x the size of PCE (personal consumption expenditures)” in which Visa has only penetrated less than 1% of, underscoring the massive growth runway ahead in related opportunities. VisaDirect is one of Visa’s core new flows business segment, which facilitates the movement of money online for consumers, businesses, governments and customers worldwide. Through VisaDirect, the company captures share in the burgeoning market for online push payments by facilitating the “transfer of funds to a debit account in 30 minutes or less”, enabling consumers to make real-time money transfers to family and friends, businesses to remit payments directly to employees and suppliers, and governments to issue stimulus payments directly to eligible recipients. With “two-thirds of adults worldwide now [making or receiving] a digital payment” and many doing so for the first time since the onset of the global pandemic, VisaDirect’s push payment solutions are well-positioned for accelerating market share gains for Visa in new flows opportunities. VisaDirect has already demonstrated continued scale beyond its core market in the U.S., with related push payment volumes quadrupling y/y during the fiscal third quarter in Latin America. The favourable performance points to continued momentum in market share gains over the longer-term, with digital payment adoption in developing economies still on the rise – 36% of adults in developing economies “received a [digital] payment into an account, such as private or public sector wage payments, government transfer or pension payments, payments for the sale of agricultural products or domestic remittances…[and] of those 36% who received a payment into an account, 83% also [made] a digital payment”. Incremental Growth With Value-Added Services Visa has also expanded to the provision of value-add services in digital payment processing solutions in recent years, underscoring its comprehensive foray within the sector. These services include issuer solutions like facilitating buy-now-pay-later (“BNPL”) capabilities; acceptance solutions such as fraud prevention, detection and resolution; risk and identity solutions; and advisory services. To expand its reach in value-added services opportunities across its network of clients, Visa has engaged in opportunistic industry consolidation activities in recent years, including the acquisition of Cardinal Commerce, VERIFI, YellowPepper, and Currencycloud. The said companies extend Visa’s foray across a comprehensive portfolio of value-added opportunities in digital payments spanning authentication, transaction dispute resolution, payment flow acceleration, and FX solutions for cross-border transactions. Visa has also internally developed a “risk-as-a-service” solution that leverages AI to monitor, detect and block fraudulent transactions, safeguarding $2 billion on an annualized basis in payment volume exposure to cyber-criminal activity. With value-added services expected to “grow 2x consumer payments” over the longer-term, and Visa’s proven track record in capturing solid demand for said solutions in recent years (+20% y/y growth in F3Q22), the segment represents a core opportunity for the company to diversify its revenue portfolio from overreliance on payments volume. Fundamental Analysis Drawing on the foregoing analysis on Visa’s three core growth drivers and related prospects over the longer-term, the company is expected to capitalize on payments volume growth at a five-year compounded average growth rate (“CAGR”) of 7.3% from $11.7 trillion by the end of fiscal 2022 towards more than $16.6 trillion by fiscal 2026. This is forecast to generate net revenues of $29.3 billion by the end of the current fiscal year, with further expansion towards an annualized figure of more than $42 billion by fiscal 2026. International transaction revenue is expected to be a core driver of net revenue growth in the near-term as Visa continues to capitalize on opportunities stemming from the global post-pandemic recovery narrative. Meanwhile, longer-term growth in revenue streams reliant on payments volume will be sustained by emerging opportunities in consumer e-commerce adoption, as well as new flows. Visa Revenue Projections (Author) As a result, the company is expected to benefit from continued margin recovery and expansion, primarily driven by the return of more profitable international transaction revenues, as well as continued ramp in the delivery of its new flows and value-added services / solutions to drive additional economies of scale. Visa Financial Projections (Author) Valuation Analysis Based on the foregoing analysis on Visa’s best-in-class fundamentals and capital structure, as well as its increased near-term visibility into post-pandemic recovery and longer-term aspirations in expanding market share across legacy and emerging digital payment solutions, we are setting a near-term price target of $230 on the stock. Visa Valuation Analysis (Author) This would represent upside potential of 12% based on the shares’ last traded price of $205.20 on September 9. The valuation analysis applies a 29.4x forward P/E multiple to better reflect Visa’s earnings growth profile compared to the broader digital payment networks and services peer group (mean NTM P/E 18.9x; mean NTM EPS growth 12%).
Shareholder Returns
| V | US IT | US Market | |
|---|---|---|---|
| 7D | 0.6% | 1.2% | 1.0% |
| 1Y | -19.2% | -35.9% | -20.0% |
Return vs Industry: V exceeded the US IT industry which returned -39.1% over the past year.
Return vs Market: V exceeded the US Market which returned -23.2% over the past year.
Price Volatility
| V volatility | |
|---|---|
| V Average Weekly Movement | 3.0% |
| IT Industry Average Movement | 8.0% |
| Market Average Movement | 6.8% |
| 10% most volatile stocks in US Market | 15.5% |
| 10% least volatile stocks in US Market | 2.8% |
Stable Share Price: V is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 3% a week.
Volatility Over Time: V's weekly volatility (3%) has been stable over the past year.
About the Company
| Founded | Employees | CEO | Website |
|---|---|---|---|
| 1958 | 21,500 | Al Kelly | https://usa.visa.com |
Visa Inc. operates as a payments technology company worldwide. The company facilitates digital payments among consumers, merchants, financial institutions, businesses, strategic partners, and government entities. It operates VisaNet, a transaction processing network that enables authorization, clearing, and settlement of payment transactions.
Visa Inc. Fundamentals Summary
| V fundamental statistics | |
|---|---|
| Market Cap | US$375.80b |
| Earnings (TTM) | US$14.27b |
| Revenue (TTM) | US$28.08b |
26.3x
P/E Ratio13.4x
P/S RatioIs V overvalued?
See Fair Value and valuation analysisEarnings & Revenue
| V income statement (TTM) | |
|---|---|
| Revenue | US$28.08b |
| Cost of Revenue | US$750.00m |
| Gross Profit | US$27.33b |
| Other Expenses | US$13.06b |
| Earnings | US$14.27b |
Last Reported Earnings
Jun 30, 2022
Next Earnings Date
n/a
| Earnings per share (EPS) | 6.90 |
| Gross Margin | 97.33% |
| Net Profit Margin | 50.83% |
| Debt/Equity Ratio | 67.1% |
How did V perform over the long term?
See historical performance and comparison