Visa’s stock (NYSE: V) has increased 7% YTD, as compared to the 4% rise in the S&P500 over the same period. Further, at its current price of $223 per share, it is trading 11% below its fair value of $250 – Trefis’ estimate for Visa’s valuation. The company topped the consensus estimates in the fourth quarter of FY2022 (FY Oct-Sept), with net revenues (revenues minus client incentives) increasing 19% y-o-y to $7.8 billion. It was primarily driven by a 10% rise in the payments volume, a 49% jump in the cross-border volume (excluding intra-Europe), and a 12% increase in the number of processed transactions. Overall, the adjusted net income improved 10% y-o-y to $3.94 billion.
The company’s top line grew 22% y-o-y to $29.3 billion in FY 2022. It was due to a 50% jump in international transaction revenues, followed by a 16% growth in the services revenues, and a 13% increase in data processing income. Notably, international transaction revenues mainly benefited from normalcy in international travel, as compared to the previous two years, and an increase in consumer spending levels. On the cost front, total operating expenses as a % of revenues slightly increased in the year. Further, total non-operating income decreased from $259 million to -$677 million. All in all, adjusted net income increased 21% y-o-y to $14.96 billion.
Moving forward, we expect the growth rate to slow down in 2023, as compared to the previous year. Notably, the high growth in 2022 was due to the easing of Covid-19-related restrictions and improvement in consumer activity levels. Overall, Visa’s revenues are estimated to touch $31.9 billion in FY2023. Additionally, Visa’s adjusted net income margin is likely to increase from 51% to around 54% in the year. It will likely result in an adjusted net income of $17.4 billion and an annual EPS of $8.28. This coupled with a P/E multiple of just above 30x will lead to a valuation of $250.
|S&P 500 Return||4%||4%||78%|
|Trefis Multi-Strategy Portfolio||9%||9%||241%|
 Month-to-date and year-to-date as of 1/18/2023
 Cumulative total returns since the end of 2016