Finally, the management team has been quite conservative by avoiding the use of debt as highlighted by its net debt / EBITDA ratio of -0.1x and its conservative use of debt since its IPO. Thankfully, one of my favorite dividend growth stocks is still trading with an attractive valuation attached. It’s up more than 380% during the past decade (crushing the S&P 500’s 159.6% gains). And moving forward, I expect to see this outperformance continue because of the stock’s outsized growth prospects. Under Data Processing, Visa collects fees for authorization, clearing, settlement, value-added services, network access, and other related services. Under Service, Visa collects fees for services provided to clients, based on their usage of Visa’s services.
- Instead, Visa benefits from more spending in the real world, as consumers are traveling more, spending more at brick-and-mortar retailers, dining out more, and so on.
- However, Visa continues to pay dividends, and the dividend payout has been growing steadily over time.
- It reported net revenues of $5.7 billion, which was 6% less than the previous year.
- Visa generates revenue on a per transaction basis by collecting processing and assessment fees.
Digital wallets, BNPL, cryptocurrencies and account-to-account solutions (ACH) are the primary source of concern. Indeed, if successful, these technologies could disrupt Visa and make it obsolete. However, we believe that disrupting payment networks is a daunting task at best. To sum up, we believe that Visa can sustain a low double-digit revenue growth rate over the coming years.
Visa currently has a strong buy consensus from professional Wall Street analysts. On the 18th of March 2015, Visa performed a 4-for-1 stock split, meaning that if you had 2 Visa shares before the split, you’d get 8 more, giving you a total of 10. The stock split dilutes the number of outstanding shares, causing the stock price to decrease, offset by having additional shares. Fewer and fewer companies are paying shareholders dividends, especially in the technology sector. However, Visa continues to pay dividends, and the dividend payout has been growing steadily over time. In 2002, the European Commission exempted Visa’s multilateral interchange fees from Article 81 of the EC Treaty that prohibits anti-competitive arrangements.[92] However, this exemption expired on December 31, 2007.
How to Buy Visa Stock Now, Price Forecast and Dividend Guide
Visa’s revenue has grown steadily YOY in recent fiscal Q3 periods, from $4.6 billion in Q3 FY 2017 to $5.2 billion in Q3 FY 2018 to $5.8 billion in Q3 FY 2019. Analysts predict the upcoming report will https://bigbostrade.com/ mark a sharp reversal of that trend, as revenue declines by an estimated 17.3% YOY to $4.8 billion in Q3 FY 2020. This would mark the first YOY quarterly revenue decline in more than three years.
Visa Stock Price History
Visa’s strategy is to accelerate its revenue growth through increased volumes of existing consumer payments, new flows as electronic payments take share from cash and checks, and value-added services. The strong US dollar could impact Visa’s revenue growth hedge fund trading strategies by 3% in fiscal 2016. Currently, the company is trading at a price-to-earnings ratio of 30x. Considering the high growth and low exchange volatility expected in the upcoming quarters, the stock could offer attractive returns to investors in the long term.
Visa is expected to post earnings of $2.38 per share for the current quarter, representing a year-over-year change of +13.9%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.8%. In other words, I don’t need to see a margin of safety to comfortably buy Visa. When a company is growing its earnings at a double digit rate it doesn’t take very long for fair value estimates to rise.
The only cost Visa incurs per additional transaction is aggregated under its ‘Network and processing’ expenses. In 2022, these expenses amounted to $743M, which is 2.5% of Visa’s net revenues. By the way, thanks to its different accounting principles, Mastercard reports a 100.0% gross margin. We all know that the Software-as-a-Service (‘SaaS’) business model is viewed as one of the best models to operate. In other words, the additional cost of providing the product to another customer is extremely low. Thus, the higher the revenues of such a company, the higher its profit margin.
After adjustments, Visa earned $2.41 a share, beating the FactSet consensus view, which was for $2.34 a share. The first step to trading Visa shares is opening a brokerage account with ZFX. If you want to speculate on the stock price of Visa with day trading strategies, you can trade Visa on the ZFX MetaTrader 4 platform, used by millions of traders and thousands of brokers worldwide. The Visa shares were floated on the NYSE in 2008 for $44 dollars each. When adjusted for splits and dividends, that makes the IPO price equal to $14.13. If the cumulative dividends since the IPO are factored into the equation, that means the net cost of buying Visa shares at the IPO would have been $1.98.
In the United Kingdom, Mastercard has reduced its interchange fees while it is under investigation by the Office of Fair Trading. Jonathan Weber holds an engineering degree and has been active in the stock market and as a freelance analyst for many years. Jonathan’s primary focus is on value and income stocks but he covers growth occasionally.
V vs Credit Service Stocks
Both consumers and businesses have no choice but to be on Visa’s network, which becomes more valuable the larger it gets. Visa operates a two-sided platform that connects 4.3 billion of its cards with over 130 million merchant locations. Add in the fact that it is accepted in more than 200 countries and territories and handled 276 billion transactions in fiscal 2023, and it shows how crucial the business is to the smooth functioning of the economy. This gives me confidence that Visa’s competitive position is under no threat, at least for the next five years. The recovery in cross-border transactions and the solid financial guidance are the main takeaways. The lockdowns across the world resulting from the pandemic have weighed negatively on Visa’s growth prospects and profitability as cross-border transactions generate much higher fees than domestic transactions.
But it’s also worth mentioning that Visa is way more expensive than the overall S&P 500. And the stock is trading at a sizable premium to where it was at just eight months ago. Investors know this is a quality business, so its shares rarely go on sale at a discount. Further, over the coming weeks, we expect continued improvement in demand and subdued growth in the number of new Covid-19 cases in the U.S to buoy market expectations. Following the Fed stimulus — which helped to set a floor on fear — the market has been willing to “look through” the current weak period and take a longer-term view, with investors now mainly focusing their attention on 2021 results. Though market sentiment can be fickle, and evidence of a sustained uptick in new cases could spook investors once again.
The latter is collected every time that a transaction is made with a Visa branded card and is based on a percentage of the transaction value (around 14 bps). Note that fees will be less important for debit transactions (VS credit) and more important for cross-border transactions (VS domestic). However, merchants pay much more than just a few basis points per transaction in credit card fees (around 2% of total payment) because Visa collects interchange fees on behalf of issuer banks and acquirers also collect acquiring fees. Visa Inc. is an international payment processing network, best known for its credit, debit and prepaid cards.
According to the arguments made by some, those companies were eating Visa’s lunch, due to their better tech, lower costs for vendors, and so on. But as we see now, that narrative doesn’t really hold – it’s the disruptors that see their shares slump in recent months, and it is Visa and Mastercard that deliver excellent and estimates-beating results. For that quarter, Visa reported quarterly earnings of $2.33 per share on sales of $8.61 billion, which beat the analyst consensus estimate of $2.24 and the $8.55-billion sales estimate. It would be almost impossible for a new entrant to successfully launch a competing payments network. How would this company even begin to bring on merchants without any cardholders, or vice versa? Blockchain and cryptocurrencies could eventually enable money transfers without the need of using payment network.
Under International Transaction, Visa collects fees for processing cross-border transactions and currency conversion activities. Under Other, Visa earns revenues for value-added services which are non-related to transactions, license fees, and certification charges. These kinds of transactions are all still a small portion of the company’s business, yet they account for a huge portion of worldwide volumes. In 2022, Visa Direct had 5.9 billion transactions, which is a 36% increase from 2021.