Visa (V) has a strong earnings track record and mutual funds are taking notice as they grow their stake in the credit card giant. In April, Visa reported quarterly EPS of $2.09 on revenue of $7.98 billion. Both numbers were ahead of expectations. Is Visa stock a buy right now?
Solid post-pandemic consumer spending has been a key driver. But stubborn inflation is a growing problem as people now appear to be curbing their spending.
Most notably, a May 22 Morning Consult survey shows April spending on vacations declined substantially from 2022 highs.
“Spending on pandemic-affected sectors like restaurants, hotels and airfare is beginning to run out of steam, with two consecutive months of large year-over-year declines,” the report said.
Airfare and hotel spending in April 2023 each fell 33% vs. the same period a year ago.
Visa stock tumbled nearly 3% on May 23. Rival Mastercard (MA) stock also sank more than 3%.
X
Visa Stock: Fundamental Analysis
Visa and Mastercard, with China’s UnionPay, operate the world’s biggest electronic payment networks. Mastercard and Visa process card transactions but don’t issue credit cards.
Also, Visa and Mastercard have less exposure to interest-rate risk. Visa neither earns revenue from nor bears risk tied to the interest or fees paid by cardholders. Instead, Visa derives revenue from client services, data processing, cross-border transactions and value-added services, such as licensing fees. Its network spreads across more than 200 countries and regions.
Over the past three years, Visa averaged 14% EPS growth and 10% sales growth, according to the IBD Stock Checkup tool. On key earnings and sales metrics, Visa stock earns an EPS Rating of 93 out of 99, and an SMR Rating of A. The EPS rating reflects a company’s health on fundamental earnings, and its SMR Rating measures sales growth, profit margins and return on equity.
Visa Earnings
Visa posted earnings of $2.09 a share on revenue of $7.98 billion, topping analyst views. Strong travel trends worldwide are fueling transaction growth. Although the impact of a recent slowdown could become evident in future quarters.
International transaction revenue surged 24% to $2.75 billion, just above forecasts of $2.73 billion. Data processing revenues jumped 10% to $3.82 billion, slightly lower than views for $3.77 billion.
Visa has posted eight straight quarters of sales and earnings gains.
IBD Live: A New Tool For Daily Stock Market Analysis
Visa Stock Technical Analysis
Visa stock has a double-bottom buy point of 227.51 on a weekly chart, according to MarketSmith chart analysis. The buy zone extends to 238.88.
But Visa’s relative strength line is trending downwards. Visa’s stock fall below the 50-day line on May 23 is serious, although not bad enough to be a sell signal just yet.
If volume were higher, it would be a sell signal. But right now it’s only 20% above average. So for now the breakout is alive.
Shares earn an IBD Composite Rating of 94 out of a best-possible 99. The rating combines key fundamental and technical metrics in a single score. An 82 RS Rating is above the 80 or higher that investors in top growth stocks would want to see.
The B+ Accumulation/Distribution Rating reflects moderate buying by institutional investors in the past 13 weeks. Visa stock is highly traded, with around 6.3 million shares exchanging hands on a typical day.
Roughly half of outstanding shares are owned by mutual funds: 6,319 funds owned Visa stock as of March 2023, up from 6,225 in December 2022.
IBD 50 Growth Stocks To Watch: Find The Best Stocks To Buy And Track
Visa Not Giving Up On Cryptocurrencies
On March 29, Visa said it would become the first major payments network to settle transactions in USD Coin, a stablecoin backed by the U.S. dollar, over Ethereum.
Visa is piloting the capability with Crypto.com, a Visa partner and one of the largest crypto platforms. It plans to offer the USDC settlement capability to additional partners later this year.
Working with Anchorage, the first federally chartered digital asset bank, Visa has launched a pilot that allows Crypto.com to send USD Coin to Visa to settle a portion of its obligations for the Crypto.com Visa card program.
While Visa has said it doesn’t plan to exit the crypto space given recent fallout from the FTX bankruptcy, it did call for more regulation.
IBD Stock Of The Day: See How To Find, Track And Buy The Best Stocks
Visa Outlook
Consumers and travelers are eager to put Covid in the rear-view mirror, but inflation is eating into disposable income and recession fears loom. Credit-card debt has also spiked in recent months. And e-commerce sales, which peaked during the pandemic, are normalizing too.
However, there’s no going back. The shift to e-commerce is here to stay.
“This works in our favor because Visa’s share of digital commerce, where cash is not an option, is approximately three times greater than the physical point of sale,” Visa has said.
Digital payments — fueled by the rise of 5G networks — are a growth opportunity. Visa’s real-time push in payments technology has seen robust growth during the pandemic.
And as travel continues to pick up worldwide, Visa payments volume, processed transactions and cross-border volumes are improving. The term refers to transactions between shoppers and merchants from different countries.
Catch The Next Big Winning Stock With MarketSmith
Rival Payment Stocks To Visa
Highly rated companies in IBD’s payment processing group include Square (SQ) and PayPal (PYPL). Visa’s other established rivals include Mastercard and American Express (AXP).
Visa is ranked No. 3 in IBD’s industry group ranking of credit card and payment processors, behind No. 1 Shift4Payments (FOUR).
The payment processing group ranks No. 56 out of 197 industry groups tracked by IBD.
Get Full Access To IBD Stock Lists And Ratings
Is Visa Stock A Buy?
The Dow Jones card giant has a commanding share in the fast-growing digital payments market. Visa earnings are rebounding as coronavirus headwinds subside and many people resume travel worldwide. But consumer spending is beginning to show signs of weakness amid sticky inflation.
Bottom line: Visa stock is technically in a buy zone, but May 23’s break of the 50-day line is a red flag. So for now the breakout is alive, but tread carefully.
To find other best stocks to buy or watch, check out IBD Stock Lists and other IBD research.
YOU MAY ALSO LIKE:
Is PayPal Stock A Buy Right Now? Here’s What PYPL Earnings, Charts Show
Warren Buffett Stocks: What’s Inside Berkshire Hathaway’s Portfolio?
MarketSmith: Research, Charts, Data And Coaching All In One Place
Join IBD Live And Learn Top Chart-Reading And Trading Techniques From The Pros
These Are The 5 Best Stocks To Buy And Watch Now