Visa (v) has Track record of solid earnings and making more moves in digital payments. Is Visa Stock Buy Now?
Dow Jones stock dominates the US credit card networks through transactions and exchange cards. It has ample room for growth in digital payments, while pursuing new bets in fintech and cryptocurrency.
On July 7, Visa reported that consumers spent more than $1 billion in cryptocurrency globally on goods and services through their crypto-linked cards in the first half of 2021. Visa did not share exact numbers for 2020 and 2019. But it estimated that represents the spending On crypto in the same period last year and 2019 is only a small part of that amount.
As a result, on December 8, Visa launched its global cryptocurrency advisory practice. Visa said in a statement that this is an offering within Visa Consulting & Analytics “designed to help clients and partners advance their cryptocurrency journey.”
Meanwhile, Visa, Master Card Credit Card (Master) and American Express (AXP) is struggling to penetrate emerging markets, while PayPal (PYPL) entered China’s digital payments market with its purchase of GoPay last year.
Both MasterCard shares and PayPal shares are on the IBD Long-Term Leaders List.
Visa Basics and Profits
Visa and Mastercard, together with China’s UnionPay, operate the world’s largest electronic payment networks. MasterCard and Visa process card transactions but do not issue credit cards.
Also, Visa and Mastercard are less exposed to interest rate risk. Visa does not earn revenue and does not bear the risks associated with interest or fees paid by cardholders. Instead, Visa derives revenue from customer services, data processing, cross-border transactions, and value-added services, such as licensing fees. Its network spreads across more than 200 countries and regions.
On October 26, Visa beat estimates for the fourth quarter, thanks in large part to a recovery in cross-border transactions. Visa reported earnings of $1.62 per share, a 45% increase over the previous quarter, on sales of $6.6 billion, an increase of 29%. Earnings per share were $5.91 for the year, while revenue rose 10% to $24.1 billion.
FactSet analysts expected earnings per share of $1.55, an increase of 44% year over year. Revenue was expected to reach $6.52 billion, up 28% from last year’s quarter.
Payments volume grew 17% for the quarter and 16% for the whole of 2021. Cross-border payments volume increased 38% in the fourth quarter and 9% for the year. Processed transactions increased 21% for the third quarter and 17% for the full year.
Over the past three years, Visa has averaged 4% EPS growth and 2% sales growth, according to the IBD Inventory Check Tool. On key earnings and sales metrics, Visa’s stock has an EPS rating of 89 out of 99, and an SMR rating of A. The EPS rating reflects the company’s health in relation to underlying earnings, and the SMR rating measures sales growth, profit margins, and return on financial value.
On November 17, the online retail giant Amazon (AMZN) said it will stop accepting Visa credit cards issued in the UK from January 19, 2022, citing excess transaction fees. Visa said it was disappointed with the decision and that it continues to negotiate with Amazon to find a solution before that date.
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Visa Technical Analysis
The payments giant has fallen from a buy-from-buy range at 237.60 from a flat base, according to MarketSmith chart analysis. Visa stock is now in a month-long consolidation process with the entry of 252.77. Stocks are trading above the 50-day line again, while Visa’s relative strength line has been trending higher recently.
The stock receives an IBD compound rating of 63 out of a possible 99. The rating combines basic and key technical metrics into one score. The 42 RS rating is well below the 80 or higher that higher-growth equity investors would like to see.
The E Accumulation / Distribution rating reflects the heavy selling by institutional investors in the last 13 weeks. Visa’s shares are highly traded, with about 11.3 million shares traded on a normal day.
Half of the shares outstanding are owned by mutual funds: 5,570 funds owned by Visa shares as of September 2021, up from 5,598 in June.
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Visa disputes India’s promotion of RuPay
Visa has complained to the US government that India’s “unofficial and official” promotion of domestic payments rival RuPay gives it an unfair advantage over the US card giant in a key market, according to a Reuters report on Nov.
The report says that Visa discussed the case on August 9 with US Trade Representative Catherine Taye.
Publicly, Visa has reduced competition from RuPay. RuPay is a multinational Indian financial services and payment system, launched by the National Payments Corporation of India in 2012.
Indian Prime Minister Narendra Modi likened the use of local cards to national service.
Cryptocurrency Visa Eyes, Fintech
On August 23, Visa said it had purchased CyperPunk NFT on August 19 for about $150,000 worth of Ethereum. The digital art piece is Visa’s first foray into NFTs. A set of nine rare CryptoPunks that were among the first 1,000 coins to be minted sold for nearly $17 million at a Christie’s auction last May.
On August 16, Visa partnered with PayNearby, India’s leading digital payments and branchless banking network, and RBL Bank to launch SoftPoS and mPOS for its 1.5 million-plus retail network.
While SoftPoS allows merchants to accept contactless payments through a simple tap-and-pay mechanism on NFC-enabled smartphones, PayNearby + MPOS 2-in-1 mini ATM allows for easy acceptance of last-mile debit/credit cards.
On March 29, Visa said it would become the first major payment network to settle transactions with USD Coin, a stablecoin backed by the US dollar, via Ethereum.
Visa is experimenting with possibilities with Crypto.com, one of Visa’s partners and one of the largest crypto platforms. It plans to offer USDC settlement capability to additional partners later this year.
Working with Anchorage, the first federally leased digital asset bank, Visa has launched a pilot program that allows Crypto.com to send US dollar currency to Visa to settle part of its obligations to the Visa Crypto.com Visa Card Program.
Visa partners with BlockFi
On July 6, Visa teamed up with fintech firm BlockFi to launch a 2% Bitcoin rewards credit card for US residents.
Meanwhile, on June 24, Visa said it was buying Swedish fintech startup Tink for $2 billion. Tink will bring more than 250 million customers across more than 3,400 banks and financial institutions in Europe.
Visa seeks to establish itself in the fast-growing open banking market in Europe. Open banking services allow financial companies to access customers and their data at competing institutions, if customers agree.
Banks and consumer-facing start-ups are using Tink’s services to create apps and other tools that allow customers to manage accounts at different organizations in one place.
Visa also recently added crypto lender Cred, which uses the Visa network to send interest payments to users’ bank accounts.
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According to its most recent annual report, Visa expects to move $17 trillion in consumer spending and $15 trillion to $20 trillion in business spending on cards and digital formats. For now, most of that spending is still cash and checks.
Due to vaccination rates, the volume of Visa payments and transactions processed is improving faster than volumes across borders. The term refers to the transactions between shoppers and merchants from different countries.
Meanwhile, a positive trend amid the pandemic is the continued shift of e-commerce sales around the world.
“This works in our favor because Visa’s share in digital commerce, where cash is not an option, is nearly three times larger than the physical point of sale,” Visa said.
Digital payments – fueled by the emergence of 5G networks – are an opportunity for growth. Visa’s real-time payments technology has seen strong growth during the pandemic.
In June, Visa announced its partnership with Facebook social networking site (FB) On WhatsApp payments in Brazil. The messaging service has 120 million users in the largest country in South America.
Brazil’s central bank authorized payments via WhatsApp chat in July, after briefly suspending the newly launched service and asking Visa and Mastercard to halt such payments. The central bank referred to competition and data privacy risks in its previous decision.
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Visa and Corona Virus
Vaccination rates against Covid in the United States have stopped. The rapid spread of the Omicron variant worldwide is a concern.
Meanwhile, most of Europe remains open to American tourists, although vaccinations are required. However, total international travel is not expected to return to normal levels until 2022.
As a result, a renewed contraction in global growth and consumer spending will be a major risk to Visa stocks, after the coronavirus triggered a demand shock.
The hardest hit category of Visa includes travel, fuel, dining and entertainment. This sector comprises a third of the volume of Visa payments in the United States.
The food and drug store category has returned to growth, along with home improvement, retail, auto, healthcare, education, and government. Visa is also looking to seize opportunities from the pandemic.
One example of this is contactless payments. Even countries where the adoption of pay-to-pay has been slow, they are starting to speed up their pace amid the pandemic.
More than 500 cities around the world have adopted contactless or push fare payments, powered by Visa, as the recovery in public transit begins.
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Competing payment balances for a visa
Include highly rated companies in IBD’s payment processing group Square (SQ) and PayPal. Other competitors to Visa include American Express and Discover.
Baisin (PAYS) is a startup focused on healthcare and online recruitment. digital insurance (PAGS) and Kiwi (QIWI) are other names to watch. Brazil Stunko (STNE), powered by Warren Buffett, is also One to Watch.
Investment legend Buffett also owns small stakes in Visa and Mastercard stocks and a huge position in American Express stocks.
The Payments Processing Group ranks 179th out of 197 industry groups tracked by the International Development Bank. Visa stock ranks number 8 in this group; American Express is number 3, Mastercard is number 2, Square stock is number 11 and PayPal stock is number 21.
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Can Visa shares be bought?
The giant Dow Jones card holds a significant share in the fast-growing digital payments market. Visa profits face headwinds from the Corona virus in the near term. But the long-term outlook remains strong.
Meanwhile, Visa is also a major payments company in an industry group that is doing well.
The competition in digital payments is certainly fierce. Global economic and legal/regulatory risks are always present, as the recent UK court ruling and the Department of Justice’s antitrust lawsuit shows.
Bottom line: Visa stock is not a buy, as it is in a months-long merger with 252.77 buy points. Keep an eye on the giant Dow Jones card, as it compares favorably with many large-cap stocks that are highly rated to buy or watch.
To find other best stocks to buy or watch, check out our IBD stock listings and other IBD research.
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