After Strong Results in Q1 FY2022, Is Visa Stock A Buy?

+33.81%
Upside
201
Market
268
Trefis
V: Visa logo
V
Visa

Visa’s stock (NYSE: V) has marginally increased YTD as compared to the 5% drop in the S&P500 over the same period. Further, at its current price of $214 per share, it is trading 17% below its fair value of $258 – Trefis’ estimate for Visa’s valuationThe company, a global electronic payment solutions provider, recently released its first-quarter FY2022 results (FY Oct-Sept), topping the consensus estimates of revenues and earnings. It reported net revenues of $7.1 billion which was 24% more than the previous year. This could be attributed to a 50% jump in international transaction revenues, followed by a 19% y-o-y growth in each of the domestic processing and services revenues. Notably, the international transactions revenues benefited from the 40% growth in the total cross-border volumes due to the easing of the Covid-19 related travel curbs in most parts of the world. Overall, it translated into a 27% y-o-y improvement in the net income to $3.96 billion. 

The company’s net revenues increased 10% y-o-y to $24.1 billion in FY 2021. This was primarily because of a 17% rise in each of the data processing and services revenues. Further, the international transactions revenues grew a meager 4% in the year. The international transactions segment suffered in 2020 and the first half of 2021 due to the Covid-19 related travel restrictions. However, the situation started to improve from the third quarter, which is also evident from the recovery in the cross-border transaction volume. Altogether, the net income increased 13% y-o-y to $12.3 billion in the year. 

The consumer spending levels are likely to improve in FY2022, with a recovery in the economic conditions. Further, the cross-border volumes are anticipated to grow on a year-on-year basis. Overall, Visa revenues are expected to touch $28.8 billion in FY2022. Additionally, Visa’s adjusted net income margin is likely to see a slight increase in the year. It will likely result in an adjusted net income of $15.2 billion and an annual EPS of $7.10. This coupled with a P/E multiple of just above 36x will lead to the valuation of $258.

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Here you’ll find our previous coverage of Visa stock, where you can track our view over time.

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 Returns Mar 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 V Return -1% -1% 175%
 S&P 500 Return 1% -7% 98%
 Trefis MS Portfolio Return 2% -9% 259%

[1] Month-to-date and year-to-date as of 3/28/2022
[2] Cumulative total returns since the end of 2016

 

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