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Down 13%, Visa Stock Looks Like a Buy for Long-term Growth and Profits

Down 13%, Visa Stock Looks Like a Buy for Long-term Growth and Profits
Written by publishing team

With interest rates expected to rise and consumer spending to stabilize, now is the time to add the credit card giant Visa (New York Stock Exchange:Fifth) to the stock portfolio. V shares are selling right now, having fallen 13% in the past six months and are now trading around $215.

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The consensus view on Wall Street is that the stock is far below where it should be trading. Among the 32 analysts covering the San Francisco payments giant, the average price target for V stock is currently $275.50, or more than 28% up from current levels.

Favorable macroeconomic conditions that include the return of business travel and steady retail sales, as well as the potential for higher interest rates, should give Visa some strong tailwinds as we head into the new year.

Large periodic stock

Visa is the world’s largest credit card processing company, with annual revenue of nearly $25 billion. A V is a cyclical leading stock, or a stock that tends to do well when the US economy is doing well.

Much of Visa’s decline since last summer can be attributed to concerns about new variants of Covid-19, the threat of new shutdowns, and restrictions on businesses that could hurt Visa’s revenue growth. However, President Biden (and several state governors) have made it clear that the US economy will remain open even as the COVID-19 virus spreads through the population. Keeping the economy open is good news for Visa and its credit cards.

As winter approaches, US retail spending has held steady, with the latest November report showing that retail sales rose 18.2% compared to November 2020. Retail sales have now increased for four consecutive months through November. And this was before the expected busy December holiday. The National Retail Federation expects holiday spending at the end of 2021 to reach a record $859 billion, up more than 10% from the previous year. This is also good news for Visa as consumers use their credit cards to purchase gifts for family and friends.

Add to that the World Business Travel Association’s forecast that business travel spending will rise 38% this year to more than $1 trillion as we recover further from the pandemic, and the number of US credit card applications hit a record last fall, according to the Federal Reserve. In New York, 2022 is set to be a very good year for Visa.

Shift to FinTech

While its sales plunged in 2020 in the depths of the global pandemic, and before vaccines were widely available, Visa rebounded strongly in the second half of last year, increasing its sales nearly 30% year over year. The company’s revenue for the full fiscal year 2021 was more than $3 billion over fiscal year 2020. This strong financial performance was overshadowed by Omicron’s fast-moving variable from Covid-19 and the uncertainty it has caused to the global economy. However, with the Federal Reserve expected to raise interest rates in the coming months to combat inflation, it bodes well for the strength of Visa’s earnings and revenue growth this year and beyond.

And while Visa continued to do well at the end of the pandemic, the company isn’t resting on its laurels. far from it. Visa continues to evolve and transform itself into a financial technology (fintech) company as society becomes increasingly cashless and digital payments become the norm. Visa continues to form new partnerships and make strategic acquisitions aimed at strengthening its digital offering. Last July, the company announced that it would acquire a Swedish fintech company tink For $2.1 billion in a move aimed at strengthening its position in northern Europe.

Visa is even expanding into cryptocurrencies, launching in December a new advisory and advisory service that aims to provide clients with tips and services to help them navigate the world of digital currencies and tokens.

Buy V shares even though they are cheap

V shares, which have risen 3.28% in the past 12 months, have fallen behind both competitors Master Card Credit Card (New York Stock Exchange:MA), up 7.11%, and the market in general, with the index S&P 500 . Index An increase of 24.3%. However, investors should keep in mind that Visa shares have gained 166% over the past five years, outpacing the S&P 500’s 107% gain for five years. MA stock is up 237% in that period.

Also, Visa is attractively valued at the moment with a sales rate of 18.6 times. Although it may take a few more months, Visa’s stock is poised for a turnaround and should go up. Investors looking to buy strong and excellent stocks that they can hold and profit from for the long term should consider Visa. At its current price and valuation, V stock is a buy.

Posted in Joel Bagelol Long held a position in V. The opinions expressed in this article are those of the author, and are subject to InvestorPlace.com publishing guidelines.

Joel Baglol has been a business journalist for 20 years. He spent five years as a reporter for the Wall Street Journal, and also wrote for The Washington Post and Toronto Star, as well as financial websites such as The Motley Fool and Investopedia.

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