Visa’s Performance In 2017

Building on its strong growth momentum over the last few quarters, Visa (NYSE: V) reported record revenue and earnings throughout fiscal 2017, which ended on September 30. Its phenomenal performance has been reflected in its stock price, which has surged by approximately 45% since the beginning of 2017. The company reported a 22% year-over-year increase in revenue, net of client incentives. Shifts in exchange rates have positively benefited the bottom line, excluding the impact of which net income grew by 12% to $6.7 billion.

Visa is in an extremely strong position operationally. It has huge scale, as its credit and debit cards are accepted almost universally, it has a large number of co-branding partners, and its cards in circulation and volume of transactions processed far exceed those of its rivals. The company managed to grow its revenues by growing client incentives 34%. Moreover, the company has been consistently improving its operating margins by keeping expenses in check, in addition to the revenue growth. Its strong market position allows Visa a lot of leeway to give up some short-term profits for the consolidation of its market position in the medium to long term.

Market Leader In Cards In Circulation

Visa’s Total Cards in Circulation have been growing steadily, driven by global expansion, from 2.2 billion in 2013 to 3.14 billion in 2017. Visa has nearly twice the number of cards in circulation than 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.

Our price estimate for Visa is around 10% below the current market price.

Please refer to our complete analysis for Visa

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