October 24, 2023, $234.65
Business Overview:
- Visa, Inc. provides digital payment services for global commerce. It offers debit and credit cards, prepaid products, commercial payment solutions, and ATMs. Founded in 1958, it’s headquartered in San Francisco, CA.
Maverick Guidance:
- Short-term stock buy/sell recommendation: ACCUMULATE ONLY ON WEAKNESS
- Long-term stock portfolio recommendation: BUY
- Top quartile 10-year average annual total return among the Dow 30 companies.
Consideration for Maverick Portfolio:
- Dow 30 company (ticker) is appropriate for Mavericks with a risk profile score of 30 and above. The Maverick MODERATE GROWTH, DYNAMIC GROWTH, and AGGRESSIVE GROWTH portfolios are suitable.
- The only reason for not including Visa in the CONSERVATIVE AND CAUTIOUS GROWTH Portfolios is because the company’s internal weaknesses and external threats are likely unacceptable for Mavericks with a desire for more dividend income and a low tolerance to risk, especially in a new high-interest rate environment. However, the company’s extremely high total annual return performance over the long run cannot be denied.
Internal Strength/Weakness
Strengths:
- Largest Market Share: Visa holds the largest market share in the United States and operates globally.
- Innovative Products: The company consistently develops products to adapt to changing customer needs.
- Secured Dossier Centers: Visa’s dossier centers are highly secure and capable of handling numerous transactions and fraud detection parameters.
- Endorsements: Visa sponsors various global events and initiatives, including the Olympics, Paralympics, and FIFA.
- Currency Of Progress: Visa supports digital currency education and progress, including stablecoins like USDC.
Weaknesses:
- Risk & Hazards: Visa faces significant exposure to risk and fraud, with occasional transaction system weaknesses leading to payment issues and customer trust concerns.
- Integration Challenges: Visa struggles to effectively integrate firms with diverse capabilities and may have difficulty adapting to changing company needs.
- Product Range Disagreements: Differences in Visa’s product range may lead to competition from companies with better product offerings, potentially causing a loss of customers.
- Research and Development: Despite investing in research and development, Visa faces challenges in keeping up with innovative competitors in the financial industry.
- High Dependency Rate: Visa relies heavily on contractual relationships with large clients and maintains a worldwide client base.Top of Form
External Opportunities/Threats
Opportunities:
- Technology Upgrade: Visa’s adoption of new technology allows for competitive pricing strategies and enhanced customer service, attracting new customers and maintaining existing ones.
- E-currency: The global use of digital currency benefits Visa, enabling easy international money transfers and transactions and enhancing customer convenience.
- Digital Transformation: Digitalization, including online payments, scan payments, and UPI transfers, has simplified transactions, benefiting Visa and other online businesses.
- New Industry Entry: Visa’s expansion into new markets is facilitated by government concessions, allowing the company to implement high-tech standards and engage in free trade agreements.
- Low Inflation Rate: Reduced inflation rates provide market stability and lower interest rates for Visa’s customers, promoting easier purchasing and reduced demand uncertainty.
Threats:
- Global Transactions: Visa operates worldwide, exposing it to currency fluctuations due to varying currencies and volatile political climates in many markets.
- Less Experienced Workforce: Visa’s shortage of experienced workforce in global markets poses a future threat to the company.
- Competitive Environment: Visa faces intense competition in the financial market, competing against major rivals like Mastercard and established digital payment companies like PayPal. To thrive, Visa must establish a strong, unique selling proposition (USP).
Market Guidance:
- Consensus Analyst Ratings— MarketBeat = Moderate Buy, TipRanks =.
- 25 Wall Street analysts have offered 12-month price targets for Visa in the last 3 months. There are 21 Buy, 4 Hold, and zero Sell. (from TipRanks)
- Based on 21 Wall Street analysts offering 12-month price targets in the last 3 months, the average price target is $279.38, with a high forecast of $310.00 and a low forecast of $240.00. The average price target represents a 19.1% change from the last price of $234.65. (from TipRanks)
- Dividend Yield: $0.45 per share paid quarterly to yield 0.77%.
- Dividend growth for 9 years. (from TipRanks)
- Technical Sentiment (based on Technical Indicators and Moving Averages):
- Investing.com = Daily (STRONG SELL) and Weekly (NEUTRAL)
- TipRanks = Daily (SELL) and Weekly (NEUTRAL)
Value Line Guidance:
- Company Financial Strength Rating: A++
- Share Price Safety, Market Timing, Technical Rank: 1=best. 5=worst
- Share Price Safety: 1 of 5
- Market Timing: 3 of 5
- Technical Rank: 3 of 5
- Beta: 05
- Stock’s Price Stability: 90/100
- Price Growth Persistence: 95/100
- Earnings Predictability: 90/100
- Average Annual PE: 28
- Average Annual Revenue Growth in the past 5 years: +12.0%
- Average Annual Revenue Growth for the next 5 years: +11.0%
- Average Annual Cash Flow Growth in the past 5 years: +14.0%
- Average Annual Cash Flow Growth for the next 5 years: +11.0%
- Average Annual Earnings Growth in past 5 years: +14.5%
- Average Annual Earnings Growth for the next 5 years: +13.5%
- Average Annual Dividend Growth in the past 5 years: +5.00%
- Average Annual Dividend Growth for the next 5 years: +18.0%
- Average Annual Dividend Yield 3 to 5 years: +13.0%
Revenue, Cash Flow, Earnings Quarterly Operations Review:
September 2023 Q4 FY2023 Report
- GAAP net income was $4.7 billion or $2.27 per share, increasing +19% and +22%, respectively, compared to the previous year.
- Non-GAAP net income, excluding special items and related tax impacts, was $4.8 billion or $2.33 per share, an increase of +18% and +21% over the prior year.
- Net revenues in the quarter were $8.6 billion, up +11%, due to growth in payments volume, cross-border volume, and processed transactions.
- Payments volume increased +9% on a constant-dollar basis for the three months ended September 30, 2023.
- Cross-border volume, excluding European transactions, increased by +18% on a constant-dollar basis.
- Total processed transactions for the quarter were 56.0 billion, a +10% increase over the previous year.
- Fiscal fourth quarter service revenues were $3.9 billion, up +12% over the prior year.
- Data processing revenues increased +13% to $4.3 billion, international transaction revenues grew +10% to $3.2 billion, and other revenues reached $744 million, a +35% increase over the prior year.
- GAAP operating expenses were $3.1 billion, a +13% increase over the prior year.
- Cash, cash equivalents, and investment securities totaled $22.0 billion at the end of September 2023.
- Weighted-average diluted shares of class A common stock outstanding were 2.07 billion for the quarter.
June 2023 Q3 FY2023 Report
- Visa reports good operating results at the three-quarter point of fiscal 2023.
- Revenues increased by +12% to reach $24.04 billion during the nine months ending June 30, 2023.
- Non-GAAP earnings grew by +15% to $6.43 per share for the same period.
- Full-year targets have been adjusted to $32.55 billion in revenues and $8.60 per share, representing +11% and +15% annual gains, respectively.
- Transaction activity showed healthy growth in various regions despite Visa suspending operations in Russia in March 2022.
- Visa’s balance sheet is in excellent shape, with total debt declining -13% in the fiscal third quarter.
- The company maintains substantial cash reserves of $15.59 billion.
- Projections for fiscal 2024 anticipate another record-setting year for Visa, with expected revenue and earnings growth of about +11% and +13%.
March 2023 Q2 FY2023 Report
- In Q2 FY2023, Visa reported strong operating results, with revenues increasing by +11% to $7.99 billion and non-GAAP earnings expanding by 17% to $2.09 per share, marking quarterly records.
- Through the first two quarters of fiscal 2023, revenues and earnings increased by +12% and +19% to $15.92 billion and $4.27 per share, respectively.
- Transaction activity showed positive growth in various regions, including Europe (+13.0%), Asia/Pacific (+8.5%), and Latin America (+18.3%).
- North America also displayed strong transaction activity, with the United States and Canada recording increases of +9.4% and +14.3%, respectively.
- The segment covering Central Europe, the Middle East, and Africa experienced a -12.5% volume decrease due to the Russia-Ukraine war.
- Visa’s financials remained solid, with total debt staying steady at $20.61 billion, a debt-to-total capital ratio of 35%, and a cash reserve of $13.84 billion.
- Forecasts for fiscal 2023 were adjusted upwards, with revenue and earnings estimates at $32.40 billion and $8.45 per share, respectively.
- Projections for fiscal 2024 suggest further growth, with revenue and earnings estimates of $36 billion and $9.70 per share.
- Visa shares are considered a timely addition to most portfolios.
December 2022 Q1 FY2023 Report
- Ryan McInerney became Visa’s CEO on February 1st, succeeding Alfred F. Kelly, Jr., who remains Chairman of the Board to ensure a smooth transition.
- The company is expected to report fiscal first-quarter financials shortly after the change in leadership.
- Growth was anticipated in the first quarter of fiscal 2023, with revenue and earnings estimates at $7.7 billion and $2.01 per share, representing annual increases of +8% and +11%.
- Transaction volumes fully recovered from pandemic lows in fiscal 2022, with notable increases in Europe, Asia/Pacific, Latin America, the United States, and Canada, despite a decrease in the segment comprising Central Europe, the Middle East, and Africa due to the Russia-Ukraine war.
- Fiscal 2023 was expected to be another strong year for Visa, with some challenges, including high inflation and energy prices in Europe and the possibility of a US recession.
- Anticipated full-year fiscal 2023 forecasts included revenue and earnings growth of +9%-10% and +10%-11%, reaching $32 billion and $8.30 per share, respectively.
Financial Performance
- 10-year Average Annual Total Return: +17.23% (through Oct 23, 2023) (Dow 30 1st quartile).
- EPS 2022: $7.50 2023: $8.79 2024: e$9.75
- Average Annual PE: 28 (VL Quarterly Report)
- PEG Ratio: 2.14 (FinViz)
- Beta: 0.77 (FinViz)
The 3-to-5-year Operational and Financial Outlook:
- The 3-to-5-year outlook indicates continued strong growth in revenue and earnings.
- The company’s long-run outlook is positive, focusing on capitalizing on opportunities in areas like automation and digital currencies.
FinViz Snapshot: https://finviz.com/screener.ashx?v=341&f=idx_dji&t=V&o=roi
Point & Figure Chart: (from StockCharts.com)
https://stockcharts.com/freecharts/pnf.php?c=V,PWTAWANRNO[PA][D][F1!3!!!2!20]
10-Year Historical Price Chart:
https://tvc-invdn-com.investing.com/data/tvc_0ac9b4c2790ba78c5b315228ce06e3de.png
