Visa’s stock (NYSE: V) has decreased 17% YTD, as compared to the 23% drop in the S&P500 over the same period. Further, at its current price of $185 per share, it is trading 29% below its fair value of $261 – Trefis’ estimate for Visa’s valuation. The company outperformed the street expectations in the third quarter of FY2022 (FY Oct-Sept), with net revenues (revenues minus client incentives) increasing 19% y-o-y to $7.3 billion. The growth was primarily driven by a 51% jump in international transaction revenues, followed by an 8% rise in data processing, and a 13% increase in service revenues. The segments benefited from improvement in the key metrics – nominal payments volume (up 14%), the number of processes transactions (up 16%), and cross-border volumes (up 38%). Overall, the net income increased 32% y-o-y to $3.4 billion.
The company’s top line grew 23% y-o-y to $21.5 billion in the first nine months of 2022. It was because of a 50% growth in international transaction fees, 19% in service revenues, and 14% in data processing revenues. The main reason behind this growth was an improvement in consumer spending levels and the easing of Covid-19-related travel bans. Altogether, it translated into a 26% growth in the net income to $11 billion.
We expect the growth momentum to continue over the coming months. Further, the firm is likely to post higher revenues in the fourth quarter on a year-on-year basis. Notably, the Q4 consensus estimates for revenues and earnings are $7.56 billion and $1.87 respectively. Overall, Visa’s revenues are forecast to touch $29.1 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 $15.3 billion and an annual EPS of $7.22. This coupled with a P/E multiple of just above 36x will lead to a valuation of $261.
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