How Will Visa Perform In The Next 3 Years?

by Trefis Team
-1.65%
Downside
147
Market
145
Trefis
V
Visa
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Visa (NYSE: V) has performed strongly over the past few years, reporting record revenue (+24% year over year) and earnings throughout fiscal 2017, which ended on September 30. This strong performance has been reflected in the company’s stock price, which surged by around 45% in 2017. Visa is in an extremely strong position operationally. It has huge scale, as its credit and debit cards are accepted almost universally, a large number of co-branding partners, and its cards in circulation and volume of transactions processed far exceed those of its rivals.

Our price estimate for Visa’s stock stands at $96, which is below the market price following the massive rally in 2017. We have also created an interactive dashboard which shows our forecasts and estimates for the company going forward; you can modify the key value drivers to see how they impact the company’s revenues, bottom line and valuation.

We expect Visa’s revenue to grow at 16% annually over the next 3 years, driven by a shift towards digital payments and Visa’s leading position in the payment industry.

 

Transaction revenue accounts for about a third of Visa’s overall revenues. The company has seen significant growth in its transaction volumes, supported by Visa’s expanding coverage and increased uptake of cards. The company’s focus on improving technology to enhance payments and securitizing the process should further help it expand its customer base and co-branding partners, and consequently drive growth in volumes and revenues.

International transaction fees account for 28% of the overall revenue. With the recovery in global economic conditions, we expect improved consumer spending and international adoption of credit cards. Additionally, the company’s expansion in developing markets should drive international GDV and revenue.

Assessments account for 35% of overall revenues. Growth in Visa’s payment volume, driven by the improvement in the U.S. economy and consumer sentiment, should help drive Visa’s assessment revenue.

 

We expect absolute growth in expenses due to expanding coverage and technology enhancements. However, that will likely be outpaced by the company’s revenue growth, driving an increase in EBITDA.

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