Payments-processing juggernaut Visa Inc. V boasts robust global operations that many financial companies envy. Unlike most financial stocks, which are highly cyclical, its strong competitive advantages enable it to excel in nearly any economic environment. A cornerstone of V’s success is its focus on payment facilitation, while some peers also engage in lending. This spares the company from having to allocate capital for loan losses or credit delinquencies during economic downturns.
Over the past year, Visa’s stock has gained 18.4%. However, it has underperformed the financial transaction industry’s average growth of 21.5% and the S&P 500’s 25% return. Competitors like Mastercard Incorporated MA and American Express Company AXP have also performed better, with gains of 21% and 63.7%, respectively. These numbers reflect Visa's steady performance but also highlight the stronger momentum seen among its peers.
Visa Stock One-Year Price Performance
Image Source: Zacks Investment Research
Visa’s Growing Operations
Visa continues to demonstrate strong growth in payments volume and processed transactions. In fiscal 2023 and 2024, processed transactions grew 10.4% and 10%, respectively, while payments volume increased 6.4% and 6.7% year over year. These growing volumes have been key drivers of the company’s revenue growth.
In fiscal 2024, Visa reported notable year-over-year increases across key revenue segments: Service Revenues rose by 8.7%, Data Processing Revenues by 10.7%, and International Transaction Revenues by 8.8%. Growth was particularly strong in payment volumes from the CEMEA region, Europe and Latin America.
Moreover, Visa's double-digit growth in cross-border payment volume reflects the untapped potential in emerging markets, where a significant portion of the population remains underbanked. This underlines Visa’s substantial international growth opportunities.
Can Visa Capitalize on Emerging Opportunities?
Visa is well-positioned to seize growth opportunities thanks to its robust operating cash flow, which enables both organic expansion and strategic acquisitions. The company's investments and partnerships highlight its dedication to broadening its network and maintaining leadership in the payment industry. These efforts have driven consistent growth in cross-border volumes.
Visa’s focus on technological innovation further strengthens its competitive edge and positions it for long-term success in the rapidly evolving financial ecosystem. The company prioritizes advancements in digital platforms, emphasizing secure and seamless solutions like contactless payments, scan-to-pay, tap-to-pay and secure remote commerce technologies. As digital transactions surge and traditional payment methods decline, Visa is well-prepared to leverage emerging trends such as buy now, pay later, cryptocurrency and others.
What Do Visa’s Earingings Estimates Say?
The Zacks Consensus Estimate for Visa’s fiscal 2025 and fiscal 2026 EPS implies an 11.6% and 12.8% uptick, respectively, on a year-over-year basis. The earnings estimates remained stable over the past week. Also, the consensus mark for fiscal 2025 and fiscal 2026 revenues suggests a 9.5% and 9.9% increase, respectively.
The company beat earnings estimates in each of the past four quarters, with an average of more than 3%. This is depicted in the figure below.
Visa Inc. Stock Price and EPS Surprise
Visa Inc. price-eps-surprise | Visa Inc. Quote
Is Visa Stock Overvalued?
From a valuation perspective, Visa is trading a bit higher than the industry. Going by its price/earnings (P/E) ratio, the company is trading at a forward earnings multiple of 26.90X, higher than its five-year median of 26.86X and the industry average of 24.60X.
Image Source: Zacks Investment Research
Meanwhile, Mastercard and American Express are currently trading at 31.59X and 19.89X, respectively.
Challenges in Visa’s Path
Visa's business faces challenges from rising expenses and potential regulatory hurdles that could impact its short-term growth. Adjusted operating expenses jumped 11.7% and 10.8% in fiscal 2023 and fiscal 2024, respectively. Also, client incentives (a contra-revenue item) grew 19.4% and 11.9% year over year during those years, affecting the adjusted revenues. The company expects client incentives to see significant growth in the coming days.
Ongoing legal challenges, including a major antitrust lawsuit filed by the U.S. Justice Department last September, could result in financial liabilities for the company and increase competition in the market. Meanwhile, in the U.K., the company is grappling with a lawsuit over interchange fees. Adding to the pressure, the country’s Payment Systems Regulator has proposed capping cross-border interchange fees and is soliciting feedback on the cap’s level.
The Credit Card Competition Act of 2023, aimed at injecting more competition in the credit card market and reducing merchant costs, could potentially slow growth for both Visa and Mastercard in the U.S. market. This act is expected to break the duopoly these companies currently hold outside the Eastern Hemisphere, where UnionPay holds dominance. The impact of changing political dynamics on the companies' operations will likely unfold in the coming weeks.
Wait-And-See Approach for Visa Stock
Visa's strong market position, operational resilience and growth potential make it an appealing choice for existing investors to hold. However, for prospective buyers, waiting for a more attractive entry point may be prudent, given the stock's high valuation and ongoing regulatory hurdles. Currently trading just 2.8% below its 52-week high of $321.62, it offers limited short-term growth potential. So, new investors may find it wise to stay on the sidelines for now.
Visa currently has a Zacks Rank #3 (Hold), reflecting a neutral outlook. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report