Global digital payment processing company Visa’s (NYSE:V) shares have soared 25.6% year-to-date, roughly in line with the S&P 500’s (SPX) surge of 25.4%. Rising travel demand boosted its Fiscal Q4 2023 earnings and revenue, which exceeded expectations. With the constant shift toward seamless cashless transactions and its ability to innovate and expand, Visa appears to be on track for solid growth, which has me bullish on the stock.
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Visa Ended Fiscal 2023 on a Strong Note
The origin of Visa marked a significant shift from traditional cash-based transactions to a more convenient and efficient payment system.
In its fourth quarter of Fiscal 2023, adjusted earnings per share (EPS) of $2.33 outperformed consensus estimates of $2.25 per share. EPS also came in higher than the $1.93 achieved in the year-ago quarter. Additionally, Visa’s net revenue jumped 11% year-over-year to $8.61 billion, beating analysts’ estimates of $8.56 billion.
For the full year of Fiscal 2023, net revenue jumped 11% year-over-year to $32.7 billion, while adjusted EPS came in 17% higher at $8.77. Management attributed the exceptional performance to the recovery in cross-border travel transactions post-COVID and growth from its value-added services.
Despite a challenging global macroeconomic landscape, with rising interest rates affecting consumer spending and geopolitical tensions, Visa’s business model has demonstrated resilience.
This resilience was reflected in its payments volume, which increased by 9% both in the fourth quarter and the full Fiscal year. Plus, cross-border volume grew by 16% year-over-year in the fourth quarter and 20% for the full year, thanks to the flourishing global travel industry that is boosting cross-border transactions.
Furthermore, according to a study conducted by Visa, despite rising inflation, “revenge travel” after the global pandemic is showing no signs of slowing down.
That means more cross-border transactions will drive revenue growth in the coming quarters. This surge in post-pandemic travel also explains why Visa’s revenue has increased from $21.85 billion in Fiscal 2020 to $32.65 billion over the trailing 12 months. EPS has also increased from $4.89 to $8.77 over the same period.
Visa’s Commitment to Return Capital to Shareholders
Another advantage of investing in Visa stock is that it pays a dividend. Its dividend yield is 0.72%, which is significantly lower than the sector average of 2.1%. However, its dividend payout ratio of 21.3% suggests that there is room for dividend increases as the company grows.
Along with its quarterly results, Visa also announced a 16% dividend hike to $0.52 per share. Additionally, the company also authorized a $25 billion multi-year share buyback program, demonstrating its commitment to returning capital to shareholders.
Continuous Innovation and Growth
Despite its remarkable success, Visa is confronted with new challenges in an ever-changing financial landscape. Concerns about data security and privacy remain pertinent in the digital age, necessitating continuous innovation in safeguarding sensitive information.
Looking ahead, Visa’s focus remains on technological innovation and strategic partnerships. On October 2, Visa announced a $100 million initiative to invest in next-generation start-ups ready to develop “generative AI technologies and applications that will impact the future of commerce and payments.”
On December 15, Visa also announced entering into a definitive agreement to acquire a majority stake in Mexico-based payment company Prosa. Under the terms of the agreement, Prosa will go on to operate independently. Visa intends to improve Prosa’s product offerings with new digital solutions in the meantime. Visa did not disclose the financial terms of the agreement.
CEO Ryan McInerney stated, “As we enter a new fiscal year, I am confident in our ability to deliver against a backdrop of geopolitical and economic uncertainty. There is tremendous opportunity ahead, and I am as optimistic as ever about Visa’s role in the future of payments.” Management anticipates constant-dollar net revenue growth in the low double digits for Fiscal 2024.
For Q1 Fiscal 2024, analysts predict EPS of $2.34 on revenue of $8.55 billion. For full-year Fiscal 2024, analysts estimate Visa’s revenue to increase by 7.0% year-over-year to $47.9 billion. On top of that, Visa has an impressive track record of exceeding analysts’ revenue and earnings estimates in the last few quarters.
Is V Stock a Buy, According to Analysts?
Following a strong end to Fiscal 2023, many analysts reiterated their Buy ratings for Visa. Citi analyst Ashwin Shirvaikar reiterated his Buy rating on the stock with a price target of $270. The analyst is impressed by the company’s revenue growth and its consistent ability to return capital to shareholders through dividend increases and share repurchases.
More recently, UBS analyst Tim Chiodo increased the price target for the stock to $305 from $295 with a Buy rating. Overall, analysts remain bullish on the stock, with a Strong Buy rating on TipRanks. Out of the 21 analysts covering the stock, 18 rate it a Buy, and three rate it a Hold. The average V stock price for Visa stock is $281.74, which is 8.4% above its current levels.
The Bottom Line on Visa Stock
Visa’s journey from a simple credit card program to a global powerhouse of electronic payments showcases its evolution. Furthermore, its ability to adapt to technological advances while maintaining a strong and secure financial infrastructure bodes well for the future.
While travel demand continues to rise and macroeconomic headwinds fade, Visa’s revenue and earnings may rise further in the coming years as the digital payment market expands. I believe Visa will reach its high price target of $305, representing 17.3% upside potential over the next 12 months.
Moreover, TipRanks has assigned a Smart Score of 9 out of 10 to Visa stock, indicating a high probability of the stock beating the broader market.
