Visa Inc.’s ( V Quick Quote V - Free Report) shares have jumped 6.9% in the past month compared with the 6.2% increase of the industry, thanks to greater exposure, faster economic recovery, digital payments expansion and increasing shareholder value. The company has strategically positioned itself for better returns in the future. Image Source: Zacks Investment Research
Headquartered in San Francisco, CA, Visa operates an electronic payments network all around the globe. It has a market cap of $417.2 billion and provides multiple value-added services to clients including fraud and risk management, debit issuer processing, and others.
Can It Retain Momentum?
The answer is yes and before we get into the details, let us show you how its estimates for 2021 stand. The Zacks Consensus Estimate for
earnings per share for the current year stands at $7.02, signaling an 18.8% year-over-year increase. V beat earnings estimates in each of the last four quarters, with an average of 9.8%. The Zacks Consensus Estimate for revenues for the current year is pegged at $28.2 billion, indicating a 16.9% year-over-year rise.
Now let’s delve into what’s driving the Zacks Rank #3 (Hold) stock.
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Visa continues to invest in technologies to further boost its already leading position in the payments market, minimize the impact of fraud, and protect consumer and merchant information. One of the main purviews of Visa is to ensure the security of payments as more people move from physical to digital platforms. VisaNet, Visa Token Service, Visa Direct and Visa Checkout are some of the platforms that have been developed by the company in recent years to advance its digital platform. With around 15% of global payments occurring digitally, Visa has a huge runway for growth in the emerging payments industry in the future.
Visa enjoys a strong cash and available-for-sale investment position along with strong free cash flow. This enables it to make acquisitions and fund capital expenditure that drives long-term growth. Also, backed by its strong cash position, the company remains committed to boost shareholders’ value. Visa has increased its
dividend each year since 2009, with the latest being a 17% hike in October 2021. Recently, it announced a massive share buyback program. The financial transaction juggernaut stated that its board of directors has approved a new $12-billion share buyback program, bringing the total available fund for buybacks to $13.2 billion.
Visa focuses strongly on mergers and acquisitions, partnerships, and minority investments to achieve growth. These moves have helped the company maintain its leading position in the payment network space. Visa’s recent move to acquire Tink, a European open banking platform, resonates with its efforts to be part of the Open-Banking innovation, which is being adopted by banks at a rapid rate.
Its recent Currencycloud acquisition is likely to enable the company to provide cross-border payment solutions to different sizes of businesses. The acquisition is expected to provide Visa’s consumers with innovative foreign exchange (forex) solutions for cross-border payments. The move is a prudent one since cross-border transactions are likely to rise due to growing international trade. Other companies that are working hard on improving cross-border payments include
American Express Company ( AXP Quick Quote AXP - Free Report) , Mastercard Incorporated ( MA Quick Quote MA - Free Report) and The Western Union Company ( WU Quick Quote WU - Free Report) .
American Express, based in NY, made a move in small business banking by acquiring Kabbage, which is an online lender. A large chunk of AmEx’s customer base consists of small businesses that suffered the maximum blow from the pandemic. Now that things are looking up and small businesses are rebounding, the company’s products are likely to see a surge in demand. It recently joined forces with Fujitsu in a bid to offer an expense management solution for centralizing and boosting digital transformation for all Fujitsu offices as well as group companies. AXP’s bottom line for 2021 is expected to jump 78.8% year over year.
Headquartered in Purchase, NY, Mastercard recently partnered with global financial technology (FinTech) startup Jeeves to launch the first physical card in Mexico, which will enable clients to pay in any currency wherein Mastercard is operating. MA’s deal with Jeeves will provide clients with easy solutions, cashback opportunities and secure cross-border transactions. The move will boost its presence in the Latin American market, wherein it has made several deals in the past few months. MA has a global commitment of connecting 1 billion people and 50 million micro and small businesses under the ambit of a growing digital economy within 2025. Its bottom line for 2021 is likely to jump 28.6% year over year.
Denver, CO-based Western Union enjoys a robust digital arm, thanks to several digital partnerships and investments. The company is building a solid digital services portfolio and digitizing the money movement process for clients. WU is also boosting the efficiency of operations and remains on track to achieve annual cost savings of $150 million by 2022. Western Union expects constant-currency revenue growth of 3-4% for 2021, indicating a turnaround from a 3% decline in 2020. Its bottom line will likely increase 11.2% year over year.
Despite the upside potential, there are a few factors that are impeding Visa’s growth lately. Higher client incentives, weak international business due to COVID-19 and rising expenses remain some of the headwinds for Visa. Nevertheless, we believe that a systematic and strategic plan of action will drive its long-term growth.