Global payments technology behemoth Visa (NYSE:V) has advanced only 2% so far in 2024. By comparison, the S&P 500 index has rallied 20%. Similarly, the Dow Jones Industrial Average that Visa stock is a member has gone up 15% year-to-date. Visa stock hit an all-time high on March 21 and closed at $290.96. Now, it is trading around $265, a decline of close to 9%.
Many of our readers will know that Visa dominates the payments industry stateside and worldwide. Among the four leading U.S. credit card processors, including Mastercard (NYSE:MA), American Express (NYSE:AXP) and Discover Financial Services (NYSE:DFS), Visa’s market share is over 40%.
In other words, Visa stock has lagged the broader market this year but we believe this underperformance presents a potential buying opportunity for long-term investors. The company’s dominant market position and strong financial performance make it a compelling investment. In this article, we will discuss these aspects to illustrate why Visa is a stock worth considering for the long haul.
How Recent Earnings Came
Visa’s business model revolves around facilitating secure and efficient digital payments. The company earns revenue primarily through data processing, service fees and international transaction fees. Visa’s extensive network and technological capabilities enable it to process a vast number of transactions, making it a critical player in the financial services industry.
In its most recent quarterly earnings report, management reported net revenue of $8.8 billion, representing a 10% year-over-year (YOY) increase. GAAP EPS grew by 12% while non-GAAP EPS surged by 20%. This impressive growth was driven by stable service revenue, data processing revenue and value-added services revenue, which grew by 23% in constant currency terms.
Global payments volume increased by 8% year-over-year in constant dollars, with the U.S. payment volume growing by 6% and international payments volume by 11%. Cross-border volume, excluding Intra-Europe, rose by 16% YOY, and processed transactions grew by 11%. For the full year, Visa reaffirmed its guidance for adjusted net revenue and operating expense growth in the low-double-digits, with EPS growth in the low-teens.
Following the release, Visa shares initially rose to $283. However, the stock has been volatile since then and trending lower. Shares currently trade around $265. Meanwhile, its price supports a dividend yield of 0.78%.
Visa Has Strong Leadership and Financials
The financial payments industry is characterized by rapid technological advancements, increasing consumer demand for digital payment solutions and a growing emphasis on security and fraud prevention. Visa’s extensive network and technological capabilities position it as a leader in this dynamic and competitive industry.
Wall Street is also witnessing significant growth in fintech and artificial intelligence innovations. As a result, companies are developing new solutions to enhance payment processing, financial data management and customer experience. For instance, Visa has recently expanded its value-added services business with the addition of three new AI-powered risk management and fraud prevention solutions. In addition, it is now offering an AI-backed real-time fraud detection service to U.K. banks.
In terms of Wall Street forecasts, Visa has an overall “outperform” rating among 38 analysts. Additionally, the 12-month median price target of $308.24 is over 16.0% higher than current levels.
We can also look at Visa’s financial health as determined by ranking more than 100 factors against peers in the financials sector. In terms of profit, Visa scores 5 out of 5. Moreover, in terms of cash flow and growth, it scores 4.
A closer look at valuation metrics shows that Visa’s price-to-earnings (P/E), price-to-book (P/B), and price-to-sales (P/S) ratios are 27.8x, 7.14x, and 6.7x, respectively. We must note that these metrics are on the high side compared to peers which stand at 14.5x, 4.1x, and 4.1x, respectively. Therefore, investors will want Visa to keep its financial health robust.
The Bottom Line: Adding Visa Stock to Portfolios
Visa is expected to release earnings on July 23 after market close. Until then, shares are likely to be choppy. But when the initial reaction to the earnings release passes, we expect Visa stock to trade in a range and build a base between $250 and $275 in the coming weeks. Afterwards, the shares could potentially start a new leg up.
As discussed, Visa stock has come under profit-taking pressure recently, but this slide in price has improved the margin of safety for buy-and-hold investors. The exact market-timing of when V stock could start a new leg up is difficult to determine, even for professional traders. However, Visa bulls who are not concerned about short-term volatility in V stock could consider investing now.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
