Visa Inc. ( V Quick Quote V - Free Report) is well-poised to grow on the back of strategic acquisitions, increasing business volumes and investments in digital technology. Also, the ongoing recovery of the travel and tourism sector can be a major boon for Visa.
Visa — with a market cap of $390.7 billion — operates as a payments technology company all over the world. It offers a wide range of in-house payment products, which can be leveraged by its financial institution clients. Plus, V delivers core business solutions, credit, debit, prepaid and cash access programs to different types of account holders (individuals, businesses and government entities).
Courtesy of solid prospects, this presently Zacks Rank #3 (Hold) stock is worth retaining at the moment.
Trend in Estimates
The Zacks Consensus Estimate for V’s current-year earnings is pegged at $7.16 per share, indicating a 21.2% rise from the year-ago reported figure. The stock has witnessed 13 upward estimate revisions in the past 60 days against one in the opposite direction. Visa beat on earnings in each of the last four quarters, the average being 8.4%.
The consensus mark for current-year revenues is $28.6 billion, indicating an 18.7% rise from the prior-year reported number.
A significant portion of V’s revenues comes from currency exchanges generated by the cross-border transactions. The COVID-related restrictions had kept cross-border transactions dormant. As the transaction volumes are expected to grow in the coming days, so will Visa’s top line, positioning it well for long-term growth. A glimpse of this improvement was witnessed in second-quarter fiscal 2022. Cross-border volume, excluding transactions within Europe, surged 47% year over year on a constant-dollar basis.
The travel and tourism sector is on a recovery route, with more and more people opting to fly globally this year after a long break due to COVID-imposed restrictions. This trend can help boost Visa’s payments and processed transaction volumes.
Visa is one of the most profitable companies around the globe. Thanks to its lucrative business model, V is expected to stay ahead of the competition amid the current market volatility. While the present economic uncertainty concerns some investors, the consumer spending numbers instill hope. In second-quarter fiscal 2022, U.S. payments volume jumped 16% year over year.
Domestic credit spending also witnessed growth during this time. Even though inflation and last year’s “stimulus-fueled spending” can act as headwinds in current growth readings, the situation is expected to improve in the long run.
Visa’s focus on strategically investing in the growth areas is praiseworthy. Its Acceptance Fast Track program, under which small businesses in the Asia Pacific will be able to leverage V’s new solutions, onboarding processes and program participants and subsequently accept digital payments seamlessly, can be a game changer. It can boost the digital prospects of small and medium businesses throughout the region.
Visa also joined forces with Fundbox, the embedded working capital platform for small businesses to introduce digital payment offerings. This move highlights V’s sincere efforts to pave the way for a widespread adoption of digital means by small businesses. It has a longstanding commitment of digitally empowering 50 million small businesses by 2023.
There are a few factors that are impeding the stock’s growth, lately.
Increasing expenses due to higher personnel expenses are eating into its profits. Non-GAAP operating expenses are anticipated to increase in the mid-teens during the third quarter of fiscal 2022. This can dent Visa's profit levels. Also, V's cash volume from the Asia Pacific and Europe is declining, which can be concerning. Nevertheless, we believe that a systematic and strategic plan of action will drive growth in the long term.
Some better-ranked stocks in the broader
businessservices space are International Money Express, Inc. ( IMXI Quick Quote IMXI - Free Report) , Paysafe Limited ( PSFE Quick Quote PSFE - Free Report) and EVERTEC , Inc. ( EVTC Quick Quote EVTC - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .
Headquartered in Miami, FL, International Money Express provides money remittance services. The Zacks Consensus Estimate for IMXI’s 2022 earnings indicates a 17.7% increase from the prior-year reported number.
Based in London, Paysafe is a digital commerce solution provider for different types of businesses. The Zacks Consensus Estimate for PSFE’s second-quarter earnings indicates a 175% increase from the prior-year reported number.
San Juan, Puerto Rico-based EVERTEC boasts a lucrative transaction processing business. The Zacks Consensus Estimate for EVERTEC’s 2022 bottom line has increased 2% in the past 60 days. EVTC’s earnings beat estimates in three of the last four quarters and met the mark once, the average surprise being 16.9%.