Visa (V) stock finds itself down 3.7% over the past three months, as the broader markets begin to sag.
As Visa shares attempt to stage a comeback, should investors buy into the fallen blue chip? Or will it join the rest of the market as it looks to move even lower in October?
The rise of the Buy Now, Pay Later (BNPL) trend is still a cause for concern for Visa. After all, it is the incumbent payments leader, and any disruption in consumer financing could impact the firm’s steady growth profile.
For years, the top credit card company has enjoyed sizeable earnings growth. Despite the growing number of up-and-comers looking to take a bite out of Visa’s dominant share of payments, I’d argue that Visa has more than enough agility to shrug off growing competitive pressures in this low-rate environment.
It is an innovative technology company, after all. As such, I am bullish on V stock as it looks to bounce back from its correction. (See Visa stock charts on TipRanks)
Visa’s Defense
Undoubtedly, having rates at or close to the floor has helped Visa’s competitors, as interest charged on consumer debt has largely gone unchanged for many of Visa’s most popular credit cards.
Over the past year, we’ve witnessed a lot of pent-up demand for a wide range of goods. The Apple (AAPL) iPhone 13 offered financing plans to Canadian consumers via PayBright for the very first time.
Just a sign of the times, but don’t count on this BNPL momentum to last forever, especially if consumer sentiment shows signs of slowing.
In the meantime, both Visa and its top peer Mastercard (MA), have options to weather the BNPL storm. Both companies have pushed to offer their own installment loan options. That could offset some of the pressure, but it’s the sweetening of perks on credit cards that could further alleviate BNPL pressures.
Most recently, Visa announced new benefits across its Visa Signature and Infinite line of cards. Membership to delivery service provider Shipt, online learning community Skillshare, and ticket presales to live music events offered by Sofar Sounds are some of the newly added perks for Visa credit card users.
These added benefits improve the value proposition behind some higher-end cards and should prevent card cancellations as the demand for BNPL continues to heat up.
Visa Aims for Millenials
Faster shipping for digital shopping, digital courses, and live events are benefits that seem custom-tailored to millennial audiences, which are most likely to embrace BNPL services.
That’s no coincidence. Visa is a behemoth that knows how to defend itself from disruption. Although its incredible margins could take a slight hit over the medium term, one must be impressed with its response to recent pressures.
Wall Street’s Take
According to TipRanks’ analyst rating consensus, V stock comes in as a Strong Buy. Out of 20 analyst ratings, there are 19 Buy recommendations, and 1 Hold recommendation.
The average Visa price target is $280.75. Analyst price targets range from a low of $250 per share, to a high of $305 per share.
Disclosure: Joey Frenette owned shares of Apple at the time of publication.
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