Visa’s stock (NYSE: V) has marginally decreased YTD, as compared to the 13% drop in the S&P500 over the same period. Further, at its current price of $212 per share, it is trading 21% below its fair value of $268 – Trefis’ estimate for Visa’s valuation. The company is the largest global electronic payment solutions provider. It posted better than expected results in the second quarter of FY2022 (FY Oct-Sept), with net revenues (revenues minus client incentives) increasing 25% y-o-y to $7.2 billion. The growth was primarily driven by a 24% increase in the service revenues, followed by a 16% rise in the data processing, and a 48% jump in the international transaction revenues. Further, the key metrics improved in the quarter on a year-on-year basis – nominal payments volume (up 20%), number of processes transactions (up 19%), and cross-border volumes (up 42%). Notably, the service revenue is dependent on nominal payments volume, while the number of payments transactions drives data processing revenues. Likewise, the international transaction revenues are directly based on cross-border volumes. Overall, the net income increased 21% y-o-y to $3.6 billion.
The company’s net revenues increased 10% y-o-y to $24.1 billion in FY 2021. While data processing and service revenues witnessed growth in the year, the top line was negatively impacted by lower international transaction revenues in the first two quarters. That said, the situation has improved in the current year, thanks to the recovery in consumer spending levels. Notably, the net revenues for the first six months of FY2022 increased 25% y-o-y to $14.2 billion. It was mainly driven by a 49% rise in the international transaction revenues, followed by a 22% growth in the service revenues, and an 18% increase in the data processing segment. Markedly, the cross-border volume improved 45% y-o-y. Altogether, it translated into a 24% growth in the net income to $7.6 billion.
The consumer spending levels are likely to continue their growth trajectory in the second half of 2022. Overall, Visa revenues are forecast to touch $28.7 billion in FY2022. Additionally, Visa’s adjusted net income margin is likely to see a slight increase in the year. This will likely result in an adjusted net income of $15.2 billion and an annual EPS of $7.09. This coupled with a P/E multiple of just below 38x will lead to the valuation of $268.
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|S&P 500 Return||0%||-13%||85%|
|Trefis Multi-Strategy Portfolio||1%||-18%||223%|
 Month-to-date and year-to-date as of 6/1/2022
 Cumulative total returns since the end of 2016