Visa (NYSE:V) has rebounded from March’s novel coronavirus sell-off. V stock has soared from as low as $133.93 per share to around $180 per share today. Yet, does that mean it’s too late to go long the global payments giant?
Far from it! Shares remain down about 15% from their 52-week highs. As “shelter-in-place” orders start to expire, and things begin “returning to normal,” expect Visa shares to continue climbing towards their prior price levels.
How? Won’t a weakened global economy not bode well for the company? That’s a valid concern. But today’s short-term issues pale in comparison to the long-term opportunities in V stock. Add in the company’s underlying stability, and you’re basically getting the best of both worlds.
What do I mean? With a strong economic moat, Visa is a high-quality business. In markets like these, “flight-to-quality” plays are a strong opportunity. But, that doesn’t make them a staid blue-chip with minimal growth.
Via their acquisition of Plaid, the company is protecting itself from “disruptors.” The payments world is quickly changing. But they’re not just surviving these changes, but thriving from them, as it creates catalysts for long-term growth.
Let’s dive in, and see why it’s time to buy V stock before shares continue to climb even higher from here.
V Stock, The Pandemic, and Going Forward
With the recent earnings release, we now have an idea of how the pandemic affects Visa’s operating performance. For the quarter ending March 31, the company beat on revenue and posted earnings of $1.39 per share. That’s above analyst consensus of $1.35 per share.
Yet, in the March quarter, the economic maelstrom was just getting started. The company reported material declines in revenue for March, as “social distancing” accelerated. In addition to the past quarter’s results, Visa shared with investors data indicating the impact of “shelter-in-place” on overall transaction volume.
This explains why analysts, like Guggenheim’s Jeff Cantwell, have cooled off on the stock. Last month, the analyst downgraded shares from “buy” to “hold” and removed his $230 per share price target. The rationale? Even with the coronavirus largely in the rearview mirror, high unemployment and a weakened economy could impact results in subsequent quarters.
But, this shouldn’t scare you off Visa stock. There’s a reason why shares haven’t gotten back to highs set in February.
Risk and uncertainty remain, obviously. However, this setup may give investors a great long-term entry point. The phrase “buy the dip” may be cliché, but as long-term catalysts remain in motion, I think it applies when talking about this stock.
“Old School” and “New School” Payment Trends
Why buy V stock today while the pandemic weighs down on near-term results? It’s simple. Firstly, as our own Matt McCall has described in prior analysis, the company benefits from what he calls “GDP-plus” growth.
In other words, Visa’s transaction volume climbs in tandem with global economic growth. But that’s not all! The company also benefits as payments move from cash-based to cashless transactions.
And given the company essentially operates in an oligopoly with rival MasterCard (NYSE:MA), that means continued organic growth to their top and bottom line.
Yet, companies like PayPal (NASDAQ:PYPL) could threaten Visa’s strong edge in payments. But, instead of refusing to change, and opting to stagnate until they become a dinosaur, the company is making proactive moves to ensure it stays on top.
I’m talking about their recent purchase of Plaid. In short, Plaid is the back end of many of your favorite fintech apps. They provide the technology that helps move your money from your bank account over to your Venmo account, to give an example.
So, just like how Visa’s legacy credit and debit card business is a middle man for “old school” payment transactions, Plaid is the middle man for “new school” fintech transactions. In other words, this shrewd purchase gives the payments giant the infrastructure to stay relevant as payments pivot towards the online realm.
Seize Opportunity, and Buy V Stock
Until current uncertainty dissipates, expect Visa shares to stay below where they were pre-pandemic. Yet, they won’t be treading water for long once the economy bounces back. Beyond retracing its past highwater mark, underlying catalysts could mean the payment giant’s shares continue to climb long-term.
So, what’s the play? Consider V stock a buy at today’s prices. Expect a bumpy road over the next few quarters. But in the long run, shares could be a big winner for your portfolio.
Thomas Niel, contributor to InvestorPlace, has written single-stock analysis since 2016. As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities.
