Will Payment Volume Growth Continue To Drive Visa’s Results?

by Trefis Team
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Visa (NYSE: V), the US-based financial services company, is set to release its fourth quarter and full year financial results on 24th October 2018. The company has had a good year, with its stock surging almost 25% year-to-date due to double digit growth in payments volume and processed transactions, both in domestic and international markets. The market expects the company to deliver a similar revenue growth in the current quarter. While the company’s operating expenses are likely to be high due to growing volumes, its efforts to tap into the global contact-less transaction markets through its Visa Direct Program is expected to augment its performance. Backed by the stronger performance in the first half of fiscal 2018, Visa expects its fiscal 2018 net revenue to grow in low double digits on a nominal dollar basis.

We currently have a price estimate of $145 per share for Visa, which is higher than its market price. You can view our interactive dashboard – Visa’s Price Estimate and alter the key drivers to visualize the impact on its valuation.

Key Trends To Watch For In 4Q Results

  • Last quarter, Visa had reiterated that its net revenue (nominal basis) and operating expense are  expected to grow (adjusted for special items) in the low double-digits. Further, the adjusted EPS growth is expected to be in the low 30% range.
  • Visa’s revenue growth is likely to be driven by a solid growth in its transaction volumes, supported by the transition towards digital payments and its expansion plans. The company’s Digital Commerce program is aimed at providing consumers with a simple, secure, and smooth experience while using their cards for digital payments. This, coupled with the company’s partnerships with large clients such as PayPal and Netflix, will enable it to expand its customer base and drive its top-line growth.
  • Further, a robust macro-economic environment will complement debit and credit payments, and in turn, Visa’s volume growth. In addition, the company’s growing presence in the international markets, such as China, Japan, Brazil, and Europe, boost its payment volume growth.
  • Visa’s operating expenses are expected to be grow due to high marketing spend, coupled with the acquisition of Freedom and higher employee incentive accrual. This is likely to weigh on its bottom-line for the quarter as well as the full year.

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