Shares of credit card company Visa (NYSE:V) are ripe for the picking. At roughly $200 a share, V stock is down 10% on the year and 20% below its 52-week high of $252.67.
This presents an attractive entry point for investors who want to own a leading blue-chip stock that should thrive in the current high interest rate environment and longer term as we move to a cashless society. While a global recession could hurt Visa’s performance in the near term, investors should look to the horizon with V stock and plan for long-term gains.
Investment bank Goldman Sachs recently issued an extremely positive report on V stock, saying the credit card company’s shares can rise more than 30% from current levels as it is well-positioned to navigate the current inflationary environment.
Likewise, analysts at Wells Fargo are also high on Visa, claiming that international travel this summer and in the fourth quarter holiday period should help keep its earnings elevated. Both banks see Visa as a defensive stock that could attract more investors should markets fall deeper into a bear market this year. “We see the networks’ moat as very strong,” wrote Wells Fargo in its analysis.
The bullish notes from Goldman Sachs and Wells Fargo came after Visa knocked the ball out of the park with its most recent earnings print. At the end of April, Visa posted fiscal second quarter earnings-per-share (EPS) of $1.79, a 30% increase from a year ago and topping analyst estimates by nearly 10%. Revenue climbed 25% year-over-year in the quarter to $7.2 billion, also beating Wall Street expectations.
Visa attributed the strong results to a rebound in travel, as well as an increase in its overall payments volume. V stock jumped 8% immediately after the earnings print, but has since been pulled lower by the market downturn.
The median price target on V stock among 32 analysts who cover the company is $270, implying 33% upside.
The payments industry continues to grow at a fast rate as the worldwide financial system migrates online and new technologies enable faster and more complex forms of e-commerce. The Boston Consulting Group forecasts that the global payments industry will nearly double to $2.9 trillion by 2030 from $1.5 trillion at the end of last year. And Visa, which is the biggest publicly traded financial technology (fintech) stock in the world with a market capitalization of nearly $450 billion, is well-positioned to take advantage of the growth.
Indeed, analysts forecast that Visa’s annual earnings growth will average 18% during the next five years.
Driving much of that growth will be the new ventures that Visa is engaged in. These include Visa Acceptance Cloud (VAC), a new payment solution that enables almost any internet-connected device to use the company’s cloud-connected payment terminal. Additionally, Visa is paying $2 billion to acquire Swedish fintech start-up Tink, which will provide Visa with some 250 million customers across more than 3,400 banks and financial institutions throughout Europe.
However, Visa’s biggest new venture has to do with cryptocurrencies. The company has been aggressively leading the charge into crypto with a variety of new products and services.
In March of this year, Visa became the first major payments network to settle transactions in USD Coin (USDC), a stablecoin backed by the U.S. dollar. Visa has also partnered with privately held fintech company BlockFi to launch a 2% Bitcoin (BTC-USD) rewards credit card to U.S. customers. The company even paid $150,000 worth of Ethereum (ETH-USD) to buy a CyperPunk non-fungible token (NFT) last year. While some of these endeavors might be questionable given the collapse of the cryptocurrency market in recent months, they nevertheless demonstrate that Visa is focused on the future.
Buy V Stock While It’s On Sale
Visa stock is a bargain at its current share price and worth taking a position in during the current market selloff. The company continues to beat expectations on its earnings even as it pushes into new areas and takes on new challenges. While risks remain in the form of a potential recession that could curb consumer spending, particularly on travel, the long-term thesis on Visa remains incredibly bullish. For these reasons, V stock is a buy.
— Joel Baglole
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Source: Investor Place