Visa Inc. V has announced that Coronavirus outbreak is likely to impact its cross-border e-commerce growth.
Cross-border business is likely to be negatively impacted due to reduction in cross-border travel, as people around the globe are taking precautionary measures. This has resulted in a sharp slowdown of the company’s cross-border business, particularly travel related spending in both card present and card not present.
Cross-border eCommerce unrelated to travel, however, has not been significantly impacted, except in some Asian markets. In markets where Visa processes the majority of its transactions, domestic spending growth, both credit and debit, remains largely stable with the exception of some impact in Hong Kong and Singapore
In the first quarter of fiscal 2020, cross-border volume rose 9% on a constant-dollar basis and the company processed nearly 38 billion total transactions on its network, up 11%. Visa’s cross-border volumes in the last two weeks of January were negatively impacted by the shifts in the Chinese new year with potentially some initial effects of the coronavirus outbreak.
As a result of the virus outbreak, Visa said that if cross-border business continues to show weakness through the end of the quarter, year-over-year net revenue growth in the fiscal second quarter will be approximately 2.5-3.5% lower than its previous estimate provided in the first quarter earnings conference. The company then estimated second-quarter net revenue growth to be in the low double digits, and modestly better than the first quarter (indicating revenue growth of 10% year over year).
Despite the negative news, the stock gained 5.82% in last day’s trading. Investors might are considering this outbreak as a temporary affair and that the company should do well over the long term, given an increase in personal consumption expenditure growth, shift toward electronic forms of payment and an expanding market.
In a year’s time, the stock has gained 30% compared with the
industry’s rise of 28.2%.
The company’s long-term growth is 15.4% compared with the industry’s growth of 13.9%.
Another company in the same space, Mastercard Inc.
MA, estimates revenue growth for the first quarter of 2020 to be 9-10% year over year on constant-currency basis (200-300 basis points lower than the previous projection of year-over-year growth in low double digits). If the impact is limited to the first quarter, management believes that net revenue growth for the current year will be at the lower end of the view in low-teens at cc.
Visa carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are EVO Payments, Inc. (
EVOP Quick Quote EVOP - Free Report) and QIWI PLC ( QIWI Quick Quote QIWI - Free Report) . Both these stocks carry a Zacks Rank #2 (Buy). EVO Payment and QIWI surpassed estimates in the last reported quarter by 26.3% and 46.88%, respectively.
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