Visa Stock Gained 30% In The Last Twelve Months, What To Expect Now?

+11.70%
Upside
270
Market
301
Trefis
V: Visa logo
V
Visa

Visa’s stock (NYSE: V) has gained 10% YTD, as compared to the 9% rise in the S&P500 over the same period. Further, at its current price of $285 per share, it is trading 5% below its fair value of $301 – Trefis’ estimate for Visa’s valuation

Amid the current financial backdrop, V stock has shown strong gains of 30% from levels of $220 in early January 2021 to around $285 now, vs. an increase of about 40% for the S&P 500 over this roughly 3-year period. However, the increase in V stock has been far from consistent. Returns for the stock were -1% in 2021, -4% in 2022, and 25% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that V underperformed the S&P in 2021. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for other heavyweights in the Financials sector including JPM, MA, and BAC, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could Visa face a similar situation as it did in 2021 and underperform the S&P over the next 12 months – or will it see a strong jump?

The company surpassed the street expectations in the first quarter of FY2024 (FY Oct-Sept), with net revenues (revenues minus client incentives) increasing 9% y-o-y to $8.6 billion. It was driven by an 11% growth in the services revenues, followed by a 14% increase in data processing, and an 8% rise in the international transactions income. In terms of key metrics, payments volume was up 8% y-o-y, along with a 16% jump in cross-border volume, and a 9% improvement in number of processed transactions. On the cost front, total operating expenses decreased 6% y-o-y in the quarter. Overall, net income grew 17% y-o-y to $4.9 billion.  

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The top-line was up 11% y-o-y to $32.65 billion in FY2023. It was driven by an 11% rise in services and data processing revenues, followed by a 19% gain in international transaction revenues. Further, operating expenses as a % of revenues witnessed a favorable drop, leading to a 15% improvement in the net income to $17.27 billion.

Moving forward, we expect the same trend to continue in Q2. Overall, Visa’s revenues are estimated to touch $35.97 billion in FY2024. Additionally, Visa is expected to report an adjusted net income of $19.8 billion in the year. This coupled with an annual GAAP EPS of $9.74 and a P/E multiple of just below 31x will lead to a valuation of $301.

 Returns Mar 2024
MTD [1]
2024
YTD [1]
2017-24
Total [2]
 V Return 1% 10% 265%
 S&P 500 Return 2% 9% 131%
 Trefis Reinforced Value Portfolio 0% 5% 644%

[1] Returns as of 3/14/2024
[2] Cumulative total returns since the end of 2016

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