Why Visa’s Revenue Will Nearly Double By 2021

November 30th, 2017 by Trefis Team
+11.89%
Upside
269
Market
301
Trefis
V: Visa logo
V
Visa
Building on its strong growth momentum over the last few years, Visa (NYSE: V) reported record revenue, net of client incentives, of $16 billion (+14% year-over-year) for calendar year 2016 and $14 billion (+20% year-over-year) for the first three quarters of 2017. The company’s massive scale – with its credit and debit cards being accepted almost universally, a large number of co-branding partners, and its total cards in circulation and transaction volumes far exceeding those of its rivals – contribute to the company’s strong growth outlook. We forecast that Visa will be able to reach over $31 billion in revenues by 2021, nearly double its 2016 revenues. In this note we explore the key factors driving this forecast.

Our price estimate for Visa’s stock stands at $100, which is slightly below the market price.

Key Factors Driving Our Forecast 

Market Leader In Cards In Circulation

Relevant Articles
  1. Visa Stock Gained 30% In The Last Twelve Months, What To Expect Now?
  2. What To Expect From Visa Stock ?
  3. Is Visa Stock Undervalued?
  4. Visa Stock To Beat The Consensus In Q2
  5. Visa Stock To Top Consensus In Q1?
  6. Is Visa Stock Fairly Priced At The Current Levels?

Visa’s Total Cards in Circulation have been growing steadily, driven by global expansion, from 2.2 billion in 2013 to 2.72 billion in 2016. Visa has more than twice the number of cards in circulation than its closest rival, MasterCard. It also accounts for more than 50% of credit card purchase volumes across the U.S. As an increasing number of international merchants accept credit and debit cards, and more international customers shift from cash to card transactions, we expect the card uptake to continue increasing, crossing 3.8 billion by the end of 2021.

Mobile Technology To Boost Visa

Visa is trying to position itself to capitalize on the recent revolutions in mobile payment technology. The company is  collaborating with Samsung to accelerate the development of near field communication (NFC) mobile payment technology. Mobile phones are also emerging as a means of extending financial services to “underbanked” customers, with transactions involving SMS based payments, direct mobile billing using PIN and one time password (OTP) authentication and mobile web payments. Growth in mobile transactions should lead to further growth for Visa.

Potential Upside And Downside To Visa’s Revenue Forecast 

International Gross Dollar Volume Per Card : Macroeconomic improvement has boosted Visa’s International GDV per card from $128 in 2010 to $188 in 2016. GDV Per Card is largely dependent on the willingness of consumers to spend more money. Improving macroeconomic conditions, coupled with the growing middle class in emerging markets, should lead to higher card spending going forward. Accordingly, we forecast Visa’s International GDV Per Card to increase to $296 in the coming years. However, if international growth is slower than expected due to further macroeconomic or geopolitical instability, and the GDV per card only reach $242 over the same forecast period, there would be a 5% downside to Visa’s valuation.

Number Of Cards In Circulation Could Reach 4.4 Billion: Visa’s card in circulation have increased at a steady clip, from 1.9 billion in 2010 to around 2.8 billion in 2016, and we expect the figure to continue its upward trajectory, reaching around 3.8 billion by the end of 2021. We expect Visa to benefit from the fast growth in cashless transactions and its strong global presence. There could be an upside of about 15% to our revenue estimate for Visa if its cards in circulation increase at a faster rate to reach 4.4 billion over the same forecast period.

Please refer to our complete analysis for Visa

Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap |More Trefis Research