V Stock – A Laggard but Hardly a Loser
Share Price: $217
YTD Performance: 43%
Market Cap: $138.41 billion
Visa (V) is trailing MasterCard stock by a wide margin this year — and over the last five years, too — but that by no means makes it a dud. MA stock may be crushing V stock, but Visa stock is still absolutely crushing the market. Unless you’re blinded by greed, you have to be happy with the returns out of V stock.
However, it is true that as well as V stock has done, it hasn’t kept pace with MasterCard stock, even though profits have the same long-term growth trajectory.
Visa, the largest credit card company by both market cap and reach, didn’t do V stock any favors when it lowered its full-year earnings guidance. That was due in large part to a stronger dollar causing negative foreign currency effects. Yes, Visa handles 60 billion transactions a year in more than 200 countries, but that global sprawl also leaves it more exposed to currency fluctuations — not to mention worldwide economic sluggishness.
More optimistically — and strategically — Visa stock is especially well-positioned for the rapid rise of mobile payments. Visa is working with Samsung (SSNLF) and other partners to ensure that it becomes the market-share leader in mobile just like it is in traditional payment processing. The mobile payments revolution could be a game-changer longer-term for V stock.
Visa stock is also attractive in the shorter term. The new $1.5 billion program to buy back V stock will offset some of the dilution weighing on this year’s earnings-per-share, for one thing.
Visa stock is also more attractively priced than MasterCard stock, sporting a forward P/E of 21 despite having essentially the same expected trajectory for earnings growth.