Why Visa Stock Was Down Today The Motley Fool

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However, as more and more people receive the Covid-19 vaccine, travel bans are likely to be lifted, benefiting the revenue stream. Overall, we expect Visa’s revenues to remain around $23.3 billion in FY2021 – up 7% y-o-y. Additionally, Visa’s P/E multiple changed from just below 34x in 2018 to close to 41x in 2020. While the company’s P/E is around 45x now, this leaves a little scope for downside when the current P/E is compared to levels seen in the past years – P/E multiple of around 41x at the end of 2020.

Visa stock price target raised to $255 from $240 at Mizuho

Entities needing financial payment processing infrastructure can enroll in VisaNet and issue Visa-branded cards and services to their clients and customers. And, again, valuation does look like a bit of a concern, particularly in a market that seems rattled this week. V stock is trading at ~28x EPS and a similar multiple to FY18 free cash flow guidance. The rise in operating expenses, which could limit expansion of the company’s already-enormous operating margins in the high-60% range, might have be enough to lead some investors to take profits. Also, Visa and Mastercard have less exposure to interest-rate risk.

Actually, in the most recent quarter, cross-border volume crossed above where it had been in 2019. Transactions processed was $45.3 billion, up 21% over the prior year and up 24% over 2019. They just revealed what they believe are the ten best stocks for investors to buy right now… That’s right — they think these 10 stocks are even better buys. While retail sales did not quite meet expectations, there is nothing here to be too concerned about with Visa. Online sales had their best month this year, up 1.9%, while furniture stores, up 1.4%, electronics/appliance stores, up 1.1%, and clothing retailers, up 0.6%, were among the best performers.

This could be attributed to a 19% drop in international transaction revenues, partially offset by an 8% y-o-y growth in the services segment, and an 11% increase in data processing revenues. This means that both payment volumes and the number of processed transactions have increased in the quarter on a year-on-year basis, however, the cross-border volume has suffered. Additionally, Visa’s operating expenses as a % of net revenues increased from 33% to 37.5% in the quarter. Although Visa’s Q4 results were higher than the consensus estimates for earnings and revenues, its net revenues of $5.1 billion were 17% less than the previous year. This could be attributed to a 38% drop in international transaction revenues followed by a 13% drop in services revenues. The payments giant derives around 27% of its revenues from the international transactions segment, which has suffered the most due to lockdown restrictions and travel bans.

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That bill, according to the Journal, could be introduced in the Senate as early as this week, so that is something to keep an eye on. As always, the devil is in the details, so investors will surely want to know what is in it and the impact it could have on Visa. © 2023 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions.

To be sure, this is a good quarter and there’s little in the numbers to support a nearly 3% sell-off in V stock. The question is if there’s something beyond the numbers, or the quarter, that should make investors nervous. Our experts picked 7 Zacks Rank #1 Strong Buy stocks with the best chance to skyrocket within the next days. Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. We expect an in-line return from the stock in the next few months. The payment processing group ranks No. 56 out of 197 industry groups tracked by IBD.

Reflecting transactions processed by Visa, the company’s processed transactions grew 39% year over year to 42.6 billion courtesy of domestic transactions. The BankAmericard network was so popular, and to compete again with the then-number 1 MasterCard, Bank of America opened use to other financial institutions. By 1970 Bank of America had relinquished direct control of the institution allowing a consortium of financial institutions to operate the company. It was rebranded as Visa in 1976 and grew to become the dominant payment processing network in the decades since. The company is anticipating the “high end” of mid-20s growth on a percentage basis. Only 9-10 points is coming from tax benefits (net of the increased employee spend).

Visa (V) Stock Forecast, Price & News

Looking forward, the news was a bit more mixed, and it might have contributed to Friday’s weakness. Full-year revenue expectations were left unchanged; investors might have been looking for a raise after a strong holiday season. Operating expenses now are guided to rise high-single-digits, roughly 2 points higher than previous guidance.

• However, the effective tax rates normalized in the subsequent years, improving the margin figure from 36.5% in 2017 to 52.6% in 2019.
• 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.
• This puts Alfred F. Kelly, Jr. in the top 30% of approval ratings compared to other CEOs of publicly-traded companies.
• So, getting more international travelers inside the United States could boost cross-border volume.
• The company has more than 3.9 billion active cards out globally; it has processed more than 255 billion transactions and is used by more than 80 million merchant locations.

The travel bans are linked to the Covid-19 case count, which is likely to normalize as more and more people receive the vaccination. Overall, we expect Visa’s revenues to remain around $23.4 billion in FY2021 – 7% above the 2020 figure. While the company’s P/E is just below 48x now, this leaves some scope for downside when the current P/E is compared to levels seen in the past years – P/E multiple of around 41x at the end of 2020. Our dashboard “What Factors Drove 56% Change In Visa Stock Between 2018-End And Now? The company outperformed the consensus estimates of revenues and earnings in the recently released second-quarter FY2021 results. Visa reported net revenues of $5.7 billion which was 2% less than the previous year.

Visa’s dominant market position is one of the key reasons investors hold this stock. In November, Visa was sued by the DOJ over its proposed acquisition of fintech firm Plaid. The deal would have given Visa a virtual monopoly in the online debit space, according to DOJ prosecutors. Plaid’s service was viewed by the DOJ as a cheaper, innovative alternative that had the potential to become a threat to Visa. Visa dismissed these allegations, though the company did drop the deal following the suit.

Why Visa Stock Dropped After Q4 Earnings

Visa Inc. is a US-based multinational financial services company formed from a consortium of US banks. It is the 2nd largest payment processor globally and the leading payment processor Etf que es outside China. Its market share in 2021 was roughly 50% of global transaction volume x-China. Transactions are processed in 1 of 4 hardened data centers in key regions worldwide.

ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities. Highly rated companies in IBD’s payment processing group include Square (SQ) and PayPal (PYPL). Visa’s other established rivals include Mastercard and American Express https://investmentsanalysis.info/ (AXP). Digital payments — fueled by the rise of 5G networks — are a growth opportunity. Visa’s real-time push in payments technology has seen robust growth during the pandemic. Consumers and travelers are eager to put Covid in the rear-view mirror, but inflation is eating into disposable income and recession fears loom.

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In an emailed statement, a Mastercard spokesperson called the Journal’s reporting inaccurate, writing there are no changes to their interchange or swipe fees. MasterCard and Visa stocks are trading at their highest levels ever. After all, the Q1 results look impressive, and it came in well ahead of analyst expectations. Meanwhile, guidance for full-year fiscal 2018 was raised, largely due to the impact of U.S. tax reform. At this time, Visa has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Another 1-1.5 percentage points are coming from currency. That still implies organic growth around 16-18% year-over-year. And the ~26-27% growth is much better than the ~22% the Street forecast coming into the quarter. Over the past three years, Visa averaged 14% EPS growth and 10% sales growth, according to the IBD Stock Checkup tool. On key earnings and sales metrics, Visa stock earns an EPS Rating of 93 out of 99, and an SMR Rating of A. The EPS rating reflects a company’s health on fundamental earnings, and its SMR Rating measures sales growth, profit margins and return on equity.

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Visa stock does look expensive, trading at roughly 27x its updated guidance for FY18. But back in October, I argued Visa was worth paying up for, and even with V stock having gained another ~14%, I still believe that’s the case. Visa is an earnings and cash flow machine with years of growth ahead. 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.

Then with this company, so Visa generates revenue in a couple of ways. It takes a percentage of the payment volume moving through its network. For that reason it’s important to pay attention to payments volume and the number of transactions. When these transactions are occurring cross-border, there’s an additional fee assessed. Payments volume was $2.8 trillion for the quarter; that was up 19%.