Amidst the ongoing AI-driven market surge, the spotlight extends beyond just artificial intelligence (AI) stocks, with fintech companies also capturing investors’ attention as the world embraces digital payments.
Visa (NYSE:V), the global digital payment processing giant, may not have experienced the meteoric rise of its tech counterparts, but its steady growth trajectory remains noteworthy. Bolstered by rising post-pandemic travel demand amidst macroeconomic challenges, Visa delivered a solid 25.3% return in 2023, in line with the S&P 500 Index.
The company’s commitment to innovation and expansion signals promising long-term growth prospects. With about $300 in discretionary funds, investing in Visa stock presents a compelling opportunity for portfolio diversification.
Year-to-date, Visa stock has surged by 8.8%, outpacing the S&P 500’s 7.2% gain, indicating a strong start to fiscal 2024.
Starting Strong in 2024
Visa’s robust performance in the first quarter of fiscal 2024 underscores its promising outlook. Adjusted earnings per share (EPS) grew by 11% year-over-year to $2.41, surpassing consensus estimates. Net revenue surged by 9% to $8.61 billion, exceeding analysts’ forecasts by $76.1 million. Strong payment volume, processed transactions, and cross-border volume were the primary growth drivers for the quarter.
The phenomenon of “revenge travel” following the pandemic contributed to a 16% increase in Visa’s cross-border volume, highlighting the sustained growth trajectory driven by post-pandemic travel demand.
Long-Term Play in the Digital Age
As the world increasingly adopts digital solutions, Visa remains at the forefront of innovation, leveraging strategic acquisitions to capitalize on AI opportunities while ensuring secure payment solutions.
Recognizing the growing threat of cybercrime, Visa forged a strategic partnership with security operations provider Expel to integrate cybersecurity measures into its value-added services. Additionally, Visa allocated $100 million to support companies developing generative AI technologies and applications shaping the future of commerce and payments.
Visa’s recent acquisition of a majority stake in Mexico-based payment processor Prosa and its completed acquisition of Pismo highlight its commitment to expanding secure and innovative digital payments globally.
Returning Value to Shareholders
Despite its steady growth trajectory, Visa maintains a stable balance sheet while rewarding shareholders through share repurchases and dividends. In fiscal 2023, Visa increased its quarterly dividend by 16% to $0.52 per share and allocated $4.4 billion in dividends and share repurchases in the first quarter of 2024.
With a dividend yield of 0.75% and a forward payout ratio of 18.6%, Visa is well-positioned to sustain dividend payments and potentially increase dividends as earnings continue to rise.
Analysts project a 13% earnings growth and a 9.8% revenue increase for fiscal year 2024, with further growth anticipated in fiscal 2025. Visa’s current stock valuation at 24 times forward 2025 earnings suggests potential upside given its historical average price-to-earnings ratio of 34x.
Wall Street’s Consensus
DBS analyst Manyi Lu rates Visa stock as a “buy” with a $305 price target, citing the company’s dominant market position in the rapidly growing digital payment market. Overall, Wall Street views Visa stock favorably, with a “strong-buy” rating from the majority of analysts.
Conclusion
Visa’s global presence, commitment to innovation, and strategic initiatives position the company for sustained growth in the digital age. With a potential upside of 15% to its high target price of $326, Visa presents an attractive buy-and-hold investment opportunity, trading below $300 per share. As Visa continues to deliver strong quarters, investors can anticipate long-term value appreciation in their holdings.
Featured Image: Unsplash
Author Faith Yakubu 
