Long-established credit-card company and payments processor Visa (NYSE:V) has, like most financial companies, struggled during the spread of the novel coronavirus. Traders are gradually bidding the price of V stock up. However, the stock has a long way to go before it can reclaim its February peak of around $213.
With the impact of the coronavirus in mind, Jefferies analyst Trevor Williams took a verbal swipe at Visa. In a note entitled “It’s Not Goodbye, It’s See You Later,” Trevor downgraded his ratings on V stock from “buy” to “hold.”
Similarly, Baird analyst David Koning dubbed V stock a “bearish fresh pick.” Clearly, the coronavirus’ impact has turned some experts against the company and its stock. However, cryptocurrency fans might find a compellingly bullish angle that the analysts could have overlooked.
Earnings-Season Challenges
Much of the attention surrounding V stock will focus on the company’s upcoming earnings report. This is expected to be released on April 30 and will address the second quarter for fiscal year 2020.
The analyst community is preparing for a mixed bag of results. They’re estimating that Visa’s earnings per share will be $1.36, compared to $1.31 per share from the second quarter of fiscal year 2019. Plus, the analysts project that Visa’s volume of payments will increase year-over-year by 7%.
On the other hand, the experts expect that the onset of the coronavirus will slow Visa’s growth rate in terms of earnings, revenues and transactions.
They’re probably correct in this somewhat pessimistic assessment. The coronavirus crisis has shaken the economy to the core. Many people are out of work and are, therefore, hesitant to go shopping. Besides medical supplies, paper products and canned goods, the public’s appetite for consumption has diminished considerably.
It’s against this challenging backdrop that Visa will have to face a potentially disappointing earnings season. Sure, Visa has survived multiple economic recessions. Yet this time it feels different as the public isn’t just afraid to spend money. They’re hesitant to leave their homes and socialize, and a society on lockdown doesn’t bode well for the economy and particularly for Visa.
An Unexpected Driver of Growth
Visa could generate revenue from a very interesting source, however. The company has teamed up with San Francisco-based start-up Fold in a cryptocurrency focused joint venture. And this partnership might just shake up the payments-processing market.
Fold was already deeply steeped in the crypto world as the company’s app offers bitcoin (CCC:BTC-USD) rewards to its users. Thus, teaming up with Fold means that Visa will be able to provide rewards denominated in cryptocurrency. This presents an interesting alternative to traditional rewards denominated in cash or airline miles.
According to Fold CEO Will Reeves, up to 10% of the cash purchases made that users of the Visa-Fold co-branded debit card will be credited to the card’s users in bitcoin.
Fold has a solid clientele of around 90,000 users. The company reports that 90% of them would “switch spending away from their existing card” to a card that offers bitcoin rewards when the user makes dollar-denominated purchases.
Reeves sees great potential for increased cryptocurrency adoption and mainstreaming with the Visa-Fold venture. “People are not interested in spending bitcoin right now, but are interested in accumulating it … If people don’t understand bitcoin as money yet, they certainly will understand it as a better reward,” explains the Fold CEO.
While the new Visa-Fold card should boost bitcoin’s profile, the benefits will likely be mutual. Adding a crypto angle to Visa’s business model could put it ahead of the curve. Younger shoppers may embrace digital currency as a means of payment. It’s important for Visa to be an early mover in this niche.
The Takeaway for V Stock
It’s understandable if V stockholders are concerned about earnings season. The challenges are there, but the experts might be ignoring a potentially market-moving move into the cryptocurrency world. An early stake in bitcoin-centered payments could drive revenues and make Visa an old company that found a new angle.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, he did not hold a position in any of the aforementioned securities.
