Visa’s Transaction Volume Poised for Growth
Visa (NYSE:V) recently reported its fiscal Q2 2011 earnings and posted net operating revenue of $2.2 billion, an increase of 14% from $1.9 billion in the same period last year. Growth in revenues were driven by growth in payment volumes, international transaction volumes and the number of processed transactions. Below we look at the factors behind the growth in number of processed transactions. Visa competes with other card networks like MasterCard (NYSE:MA), Discover (NYSE:DFS) and American Express (NYSE:AXP).
We have price estimate of $86.09 on Visa’s stock which is about 8-9% above the current market price.
Strong Growth in Number of Transactions Processed
The number of transactions processed by Visa in Q2 2011 grew by 13% to 12 billion from 10.6 billion in the same period last year. The growth in the number of processed transactions is a result of the continued shift to electronic payments globally. Also the acquisition of CyberSource delivered a 38% growth in transactions from 738 million in Q2 2010 to just over 1 billion in Q2 2011. The eCommerce growth in the U.S. and abroad remains strong and is driving transaction volumes higher for Visa.
We expect the number of transactions processed by Visa to increase from over 47 billion in 2010 to about 87 billion in 2017. Visa has taken a couple of new business development initiatives, which will help it to boost its processed transactions.
Some of these are:
- Visa signed a multi-year deal with the State Bank of India to issue Visa debit products across the SBI franchise. Nearly 500,000 Visa cards have been issued since March 2011 and the company expects several million to be issued within the first year of the program.
- In the Latin America and Caribbean region, the company signed a multi-year credit and debit agreement with HSBC which will broaden its foothold in this part of the world.
- Value added services such as Visa’s real time messaging service and CyberSource’s enhanced decision manager will encourage merchants to route transactions over Visa Net.