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Why Visa Stock Just Dropped 4.5%

Why Visa Stock Just Dropped 4.5%
Written by publishing team

What happened

Credit Card Giant Stock Visa (NYSE: V) It’s down 4.5% as of 10:40 a.m. ET Wednesday despite the company outperforming its earnings in its fiscal fourth-quarter 2021 earnings report released last night.

Heading into the fourth quarter of the year, analysts expected Visa to earn $1.54 per share on revenue of $6.5 billion. As it turned out, Visa “beaten” both the top and bottom line earnings, posting an adjusted earnings per share of $1.62 on sales of $6.6 billion—and when calculated under GAAP, a gain of $1.6 billion.5 per share – but that wasn’t good enough for investors.

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so what

Visa’s revenue outperforms 29% year-over-year growth compared to last year’s fourth-quarter revenue, and GAAP earnings are up 68% year-over-year. Visa’s results for the full year were also good, but it’s less than that. Full-year revenue up 10% and full-year profit up 13%.

The Visa Department credited “the continuing recovery in many global economies and the increased diversification of our revenues through new flows and value-added services” for helping it produce the strong numbers, and predicted that “looking to the future, Visa is even better positioned for the future as cross-traffic recovers.” borders and continue to drive the rapid growth of digital payments.”

What now

So why weren’t the investors satisfied? Why is Visa stock dropping today?

One word: guidance.

As reports this morning, Visa revealed in its post-earnings conference call — but not in its official earnings statement — that although Visa’s business “has been on the path to recovery over the past three to four quarters.” [it is] It is not yet back to normal globally. Assuming current trends continue through December, the company says, “we expect first-quarter net revenue growth from high-end teens.”

Now, that sounds good at first, but here’s the thing: “Teens Up” growth will be a marked slowdown from the 29% revenue growth that Visa enjoyed in the fourth quarter. It’s also a significant drop from the $6.95 billion in sales analysts had expected for the first quarter — which would have represented 36% growth in revenue from the $5.1 billion in revenue that Visa recorded in the first quarter of last year, according to data from S&P Global marketing intelligence. In fact, if you do the math, the “high teens” revenue growth is only an expectation of growth Half As fast as Wall Street hoped Visa could.

Given that, it’s no wonder investors are disappointed today.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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