What To Expect From Visa Stock?

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Trefis
V: Visa logo
V
Visa

Visa’s stock (NYSE: V) has increased 5% YTD, as compared to the 3% rise in the S&P500 over the same period. Further, at its current price of $218 per share, it is trading 16% below its fair value of $260 – Trefis’ estimate for Visa’s valuationThe company posted better-than-expected results in the first quarter of FY2023 (FY Oct-Sept), with net revenues (revenues minus client incentives) increasing 12% y-o-y to $7.9 billion. It was primarily driven by a 10% growth in the services revenues, a 6% rise in the data processing revenues, and a 29% jump in the international transactions income. Further, the key metrics witnessed positive growth in the quarter – nominal payments volume (up 5%), number of processed transactions (up 10%), and cross-border volumes (up 22%). On the slip side, the top line was partially offset by a decrease in client incentives from -$2.4 billion to -$2.8 billion, due to higher payments volume. Further, the operating expenses as a % of revenues witnessed an unfavorable rise from 32% to 36%. Overall, the net income grew 6% y-o-y to $4.18 billion.

The company suffered in 2020 (revenues down 5%) due to the Covid-19 crisis and the resulting lockdown. However, it reported a 10% improvement in 2021 due to the easing of the travel bans and restrictions in the second half of the year. Its revenues increased 22% y-o-y to $29.3 billion in FY 2022. The growth was mainly driven by 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, the revenues grew despite tough macroeconomic conditions. Altogether, the firm posted a 21% y-o-y rise in the net income to $14.96 billion in 2022.

Moving forward, we expect Visa’s revenues to touch $32.34 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 $17.65 billion and an annual EPS of $8.42. This coupled with a P/E multiple of just below 31x will lead to a valuation of $260.

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 Returns Mar 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 V Return -1% 5% 180%
 S&P 500 Return -1% 3% 76%
 Trefis Multi-Strategy Portfolio 0% 7% 237%
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[1] Month-to-date and year-to-date as of 3/2/2023
[2] Cumulative total returns since the end of 2016

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