Trading Strategies For Visa Stock Before And After Q1 Earnings Visa NYSE:V

Its sales matched analysts’ expectations, as did its decline in payments volume. The huge economic disruption from COVID-19 hurt Visa across the board. Due to the «significant uncertainty in the global economy» caused by the virus, Visa did not issue full-year guidance. Like Visa, Mastercard earns the majority of its revenue from service and data processing fees.

And if you don’t believe me, ask someone who bought Visa 15 years ago at its IPO how they feel about the stock. Up 1,500%+ with a yield on cost of approximately 15%, I’m sure they’re loving the money tree they planted. I say $270 instead of the exact $267 that 27x the current analyst consensus for 2024 is because I expect Visa to beat those estimates. After all, Visa has beaten Wall Street’s expectations during 19 out of the last 20 quarters.

The gross margin is the financial metric that reflects that business model best. Companies like Adobe (ADBE) are the embodiment of SaaS, with its 87.7% gross margins in 2022. In existing consumer payments, growth will be enabled by the ever-increasing convenience to transact with cards, as innovations like tap-to-pay, tokenization, and click-to-pay, continue to gain traction. https://bigbostrade.com/ Visa’s trailing annual dividend yield of just under 0.7% is higher than its 13-year median yield slightly above 0.6%, which indicates that the stock could be an attractive buy for growth-oriented investors. And while shareholders wait for the market to award Visa with a higher valuation multiple, they can collect a safe and fast-growing 0.8% dividend yield.

1. Historically, when it comes to Visa and Mastercard, we’ve seen worries about competition come and go, with the likes of PayPal (PYPL), Apple Pay (AAPL), or the popularization of Buy-Now-Pay-Later.
2. Unlike the banking institutions that issue those cards, it extends no credit, thus eliminating default risk from the business model.
3. Today, cards may be co-branded with various merchants, airlines, etc., and marketed as «reward cards».
4. The huge economic disruption from COVID-19 hurt Visa across the board.
5. However, as previously explained, creating a payment network is difficult because it requires negotiating with hundreds of issuing banks and convince millions of merchants to affiliate to the network.

Following two years of pandemic-related lockdowns and travel disruption, consumers are clearly eager to travel more – and to spend more money when traveling. That’s great news for Visa and a growth driver that should remain in place. In fact, it looks like cross-border payments volume could grow even faster during the summer months of this year. Several how to invest in uranium airline management teams have made remarks that indicate their revenue will be higher this summer compared to pre-pandemic levels, which bodes well for overall international travel. This, in turn, should help Visa benefit from strong cross-border payments volume growth in the coming quarters, which will be positive for its revenues and margins.

Is Visa Stock A Buy, Sell Or Hold After Recent Earnings?

In short, I believe the market is underrating Visa’s growth trajectory, and disregards its much better margins. There’s no sign to suggest that the 10-percentage-point gap between the companies’ EBIT margins is narrowing, and if we look at the past 6 years, Mastercard isn’t outgrowing Visa in terms of revenue and volumes to a material extent. There’s no denying that Visa is a wonderful business, but investors should also take a closer look at the valuation to determine if the stock is a buy. Right now, shares trade at a trailing price-to-earnings (P/E) ratio of 30.4. That’s below Visa’s trailing five-year average P/E multiple of 35.6, and it’s meaningfully below Mastercard’s P/E of 37. The card has often been issued to younger customers or those who may pose a risk of overdrawing the account.

While the company has seen high revenue growth over recent years, its P/E multiple has decreased. We believe the stock is unlikely to see a significant upside after the recent rally and the potential weakness from a recession-driven by the Covid outbreak. Our dashboard What Factors Drove 89% Change in Visa Stock between 2017 and now?

Before investing in a company, you should be familiar with its competitors, who may limit growth or steal market share. The company has profited substantially from easy credit, the growth of e-commerce & online payments, the adoption of mobile point of sale terminals and the general phasing out of cash. The business benefits from the increasing popularity of digital transactions, which in many cases are more convenient and safer than cash or checks. In the U.S., many Americans still use cash for a meaningful portion of their spending.

Visa posts earnings beat, but here’s why Wall Street says the stock is falling

Services are provided under the Visa, Visa Electron, Interlink, VPAY, and PLUS brands. Visa Inc. was founded in 1958 and is headquartered in San Francisco, CA. Finally, Visa wants to target new markets that, if successful, will send Visa in a new dimension. Visa currently operates in B2C, a market estimated to be worth USD 30 trillion by the company. Visa would like to develop solutions for business-to-business transactions (think payment of invoices to suppliers) which is still a slow, manual process. That new market alone is more than four times bigger than the B2C market, which could offer Visa many years of very strong growth.

Dispute with Kroger over high credit card fees

For the next fiscal year, the consensus earnings estimate of $11.13 indicates a change of +12.3% from what Visa is expected to report a year ago. For the current fiscal year, the consensus earnings estimate of $9.91 points to a change of +13% from the prior year. Because of Visa’s unique growth prospects and the high margin, predictable nature of its toll booth-like business structure, Visa has always traded with a high premium (relative to the market) attached to shares. If I’m correct and Visa is able to maintain its current pace of dividend growth, it means in 10 years’ time Visa’s annual dividend should be in the $8-$9.00 area. And looking at the company’s earnings growth rate expectations and payout ratio (just 23.7%), I think annual dividend growth in the ~15% range is sustainable over the next 3-5 years (at least). At that rate, the size of Visa’s dividend will double every 4.8 years.

Moreover, Visa generates a ton of free cash flow, to the tune of $19.7 billion in fiscal 2023. This is due to the fact that its platform requires minimal capital expenditures, with the technological infrastructure being largely built out and each additional transaction costing close to nothing to process. Another reason to add this company to your portfolio is just how remarkable its financials are. You’d be hard-pressed to find many businesses that are more profitable than this one. And if we also expect diluted earnings per share to rise at a 13% annualized clip over the next five years (slightly lower than they have in the past five years), then investors would also generate that same double-digit return.

Cash flow

So even in the most developed economies, there’s still a sizable runway for growth. This trend should continue, meaning Visa’s payments volume will keep rising over the next five years. Visa is currently trading at a 3.7% FCF yield, which seems attractive for a quality-business growing earnings and FCF around 20% per year. It closest peer, Mastercard, is trading at a 2.5% FCF yield even though we have to admit that it also has a better growth profile.

Visa and Mastercard present distinct offerings, as neither company is involved with extending credit or issuing cards. This means that all Visa and Mastercard payment cards are issued through some type of co-branded relationship. While the two companies don’t extend credit or issue cards, they do partner to offer the broadest array of products encompassing credit, debit, and prepaid card options. Visa’s second quarter results delivered strong quarterly numbers, which were above consensus estimates. In short, revenue grew 25% year on year to reach USD 7.19B (consensus at USD 6.84B), supported by a strong recovery in cross-border transactions and payment volume. Adjusted EPS came out at USD 1.79 (USD 1.70 under GAAP), a 23% YoY increase and above the USD 1.65 consensus estimate.

For our purposes here, let’s just assume that shares command the same multiple in five years that they have right now. Although the valuation is extremely important to investor returns, it’s impossible to know what it will be in five years. Moreover, the valuation that stocks trade at is heavily influenced by interest rates, which themselves are unknowable. The European Payments Initiative is just another example of a threat that fails to compete with card networks. This initiative aimed to create a European alternative to Visa and Mastercard. However, twenty banks, of a total of thirty-three, decided to withdraw from the project, forcing the remaining banks to abandon the project.

Stock brokers

From a technical analysis perspective, Visa’s stock looks bullish heading into the event, trading in an uptrend and forming a possible bull flag pattern on the daily chart. It should be noted that holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat. This gain trounces the performances of both the S&P 500 and the Nasdaq Composite Index by wide margins. Luckily, Visa has been in a favorable position for a long time because of the company’s wide competitive moat.

There is an overwhelming buy consensus for Visa stocks among Wall Street analysts. Indeed, most analysts only expect the Visa stock price to grow several per cent over the next twelve months, meaning there could be better opportunities out there. Are you trying to decide whether you should invest in Visa or perhaps speculate on the price with a long or short position? Before making your move, you should consider the company’s fundamentals, price history, dividend earning, price history and dividend earnings.