Visa (NYSE:V) is one of those stocks I should have mortgaged the house on back in early 2009. At the time, V stock traded around $10 per share.
Now, just 11 years later, the stock is up nearly 2,000% to a $205.87 — with further upside likely. All as consumers continue to move away from cash, opting to use their debit and credit cards.
Furthermore, companies like Visa don’t issue cards like American Express (NYSE:AXP) and Discover Financial (NYSE:DFS), so it doesn’t carry credit risk. It’s simply a business that collects fees from processed transactions. Plus, consumers from around the globe are only increasing their usage of credit cards — especially online.
That’s great news for a company like Visa, which owns 50% of the global payment cards market. Meanwhile, the company’s competitor Mastercard (NYSE:MA) owns 31% of the market. That said, Visa should only benefit as volume and revenue growth accelerate on the heels of massive consumer spending.
With that in mind, V stock is richly valued, and I believe it could rally to $250 in the near-term.
Top Analysts Are Still Bullish With Targets of $240
Late last month, Visa posted “unremarkable” earnings results for the first quarter of 2020.
Earnings per share (EPS) of $1.46 met forecasts, while revenue of $6.1 billion was slightly better than estimates for $6.08 billion. It was an “unusually weak quarter” to one analyst, who “pointed to some of management’s commentary about regional challenges.”
However, even though numbers weren’t strong, Visa still managed to deliver solid results — with transactional volumes only likely to increase with stronger economies and low interest rates.
Morgan Stanley analyst James Faucette still has an “overweight” rating on V stock with a price target of $240. He said Visa’s numbers were negatively hit by foreign exchange issues and global events, such as Brexit and Australian fires. At the same time, he highlights the fact Visa’s EPS is expected to grow 12.5% in fiscal 2020.
Additionally, RBC Capital Markets analyst Daniel Perlin also has an “outperform” rating with a target price of $251 per share. He notes Visa still posted solid earnings, despite slowing revenue growth. However, he’s also encouraged by a number of factors such as quicker rates of client renewals.
Further Momentum is Coming from Acquisitions
Outside of these catalysts, Visa is also growing in other ways by acquiring payment service providers. For example, it recently acquired Plaid — “a network that makes it easy for people to securely connect their financial accounts to the apps they use to manage their financial lives.”
With that, Visa clearly knows the value that acquisitions such as this one can bring to the table.
“Connectivity between financial institutions and developers has become increasingly important to facilitate consumers’ ability to use fintech applications. 75 percent of the world’s internet-enabled consumers used a fintech application to initiate money movement in 2019 versus 18 percent in 2015. Plaid has been a leader in enabling this connectivity at scale. Today, one in four people with a U.S. bank account have used Plaid to connect to more than 2,600 fintech developers across more than 11,000 financial institutions.”
The Bottom Line on V Stock
Despite recent setbacks and less than exciting earnings, there’s still plenty of long-term growth in store for the V stock.
For one, consumers from around the globe are only increasing their usage of credit cards — especially online, with Visa owning 50% of the global payment cards market. Secondly, it’s growing with smart acquisitions.
So, as I stated before, I strongly believe Visa can run to $250 in the near-term.
As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.
