Visa Stock Is Up 15% In the Last 12 Months, Will The Trend Continue Post Q2 Results?

V: Visa logo

Visa (NYSE: V) is scheduled to report its fiscal Q2 2024 results on Thursday, April 25, 2024. We expect Visa to edge past the consensus estimates of earnings and revenues. The company posted better-than-expected results in the last quarter, with net revenues (total revenues minus client incentives) increasing 9% y-o-y to $8.6 billion. In terms of key metrics, payments volume was up 8% y-o-y, followed by a 16% jump in cross-border volume and a 9% improvement in number of processed transactions. We expect the same trend to drive the second quarter results (FY Oct-Sept). Our interactive dashboard analysis on Visa’s Earnings Preview has more details. 

Amid the current financial backdrop, V stock has shown strong gains of 25% from levels of $220 in early January 2021 to around $270 now, vs. an increase of about 30% 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 V 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?

Our forecast indicates that Visa’s valuation is $301 per share, which is 12% above the current market price of $270. 

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(1) Revenues expected to marginally beat the consensus

Visa’s revenues (net revenues) grew 11% y-o-y to $32.65 billion in FY2023 and 9% y-o-y in Q1 2024.

  • The Data processing revenues grew 11% y-o-y in 2023 and 14% in Q1 2024. We expect the Q2 results to follow the same trend.
  • The Services revenue increased 11% in both 2023 and Q1. We expect the momentum to continue in second-quarter results.
  • The International transactions revenues rose by 19% y-o-y in 2023 and 8% in Q1. We expect the Q1 results to be on similar lines.
  • Overall, we forecast Visa’s net revenues to remain around $35.97 billion in FY2024.

Trefis estimates Visa’s fiscal Q2 2024 revenues to be around $8.69 billion, just above the $8.62 billion consensus estimate. 

(2) EPS likely to beat the consensus estimates

Visa Q2 2024 adjusted earnings per share (EPS) is expected to be $2.47 per Trefis analysis, 1% above the consensus estimate of $2.44. The net income increased 15% y-o-y to $17.3 billion in FY 2023 driven by higher revenues and lower operating expenses as a % of revenues. Further, the same trend continued in the first quarter of 2024. We expect the Q2 results to be on similar lines. Overall, Visa is likely to report an annual GAAP EPS of $9.74 in FY 2024.

(3) Stock price estimate is 12% above the current market price

We arrive at Visa’s valuation, using an EPS estimate of around $9.74 and a P/E multiple of just above 31x in fiscal 2024. This translates into a price of $301, which is 12% above the current market price. 

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year

 Returns Apr 2024
MTD [1]
YTD [1]
Total [2]
 V Return -3% 4% 246%
 S&P 500 Return -5% 4% 122%
 Trefis Reinforced Value Portfolio -8% -2% 598%

[1] Returns as of 4/22/2024
[2] Cumulative total returns since the end of 2016

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