Visa Inc. (NYSE:V) has experienced a remarkable 25% surge in its shares over the past year, surpassing the industry’s growth rate of 21%. This impressive performance is attributed to the company’s increasing transactions, expansion in digital payments, and the resurgence of travel numbers. Visa’s strategic positioning for future success is evident through its proactive approach to acquisitions and partnerships.
Headquartered in San Francisco, CA, Visa operates a global electronic payments network and boasts a market capitalization of $474.4 billion. The company provides various value-added services to clients, including fraud and risk management, debit issuer processing, among others.
Can the Momentum Go On?
The answer is affirmative. Before delving into the details, let’s examine the fiscal 2024 estimates. The Consensus Estimate for earnings per share for the current year stands at $9.90, reflecting a robust 12.9% year-over-year increase. Visa has consistently beaten earnings estimates in the last four quarters, with an average surprise of 5.4%. Furthermore, the Consensus Estimate for revenues in the current year is projected at $35.7 billion, indicating a substantial 9.5% year-over-year rise.
Now, let’s explore the factors contributing to the success of this stock.
Visa maintains its industry-leading position by investing in technology to combat fraud, protect consumer and merchant information, and strengthen its presence in the payments market. Noteworthy platforms such as VisaNet, Visa Token Service, Visa Direct, and Visa Checkout exemplify the company’s commitment to advancing its digital capabilities. Collaborations, such as the recent integration of Visa Direct into the money transfer services of International Money Express, Inc. (NASDAQ:IMXI), highlight Visa’s ability to facilitate partnerships.
Strategic acquisitions play a pivotal role in Visa’s growth strategy, enabling the expansion of its network and capabilities. The recent majority share acquisition of Prosa in Mexico underscores the company’s commitment to broadening its footprint and increasing payment volumes. These strategic moves are expected to enhance Visa’s technological prowess by tapping into global innovations.
The 2023 Visa Global Travel Intentions Study indicates that the post-pandemic surge in travel remains resilient, showing no signs of slowing down despite inflationary pressures. The trend of ‘revenge travel’ is anticipated to persist, contributing further to the growth of cross-border payments for Visa. Notably, the U.S. Travel Association’s Travel Price Index reveals that 73% of surveyed Americans note an increase in travel costs, but only 6% are delaying or canceling their plans.
Visa maintains a robust financial position, marked by a substantial cash and investment position and a healthy free cash flow. This financial strength supports the company’s strategic acquisitions and capital expenditures, driving long-term growth. Additionally, Visa is committed to enhancing shareholder value by consistently increasing dividends since 2009, including a 16% hike in October 2023. In the same month, the company introduced a new repurchase program of $25 billion, and in the last reported quarter alone, it returned $5 billion to shareholders through share buybacks and dividends.
Risks to Consider
Despite the positive trajectory, investors should monitor certain factors. Visa faces challenges from higher client incentives and escalating expenses. In fiscal 2024, client incentives are expected to rise by over 15% year over year, while adjusted operating expenses are estimated to increase by 8% from the previous year. Nevertheless, a systematic and strategic plan of action is anticipated to drive Visa’s long-term growth.
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