Visa Stock Has Given Near-Zero Returns YTD, What To Expect?

Visa’s stock (NYSE: V) has given near zero returns YTD, as compared to the 12% rise in the S&P500 over the same period. Notably, Visa’s peer Mastercard (NYSE: MA) is up 5% YTD. Overall, at its current price of $260 per share, it is trading 15% below its fair value of $305 – Trefis’ estimate for Visa’s valuation. 

Amid the current financial backdrop, V stock has shown strong gains of 20% from levels of $215 in early January 2021 to around $260 now, vs. an increase of about 40% for the S&P 500 over this roughly 3-year period. However, the increase in V stock has been far from consistent. Returns for the stock were 0% in 2021, -3% in 2022, and 26% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that V underperformed the S&P in 2021. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for other heavyweights in the Financials sector including JPM, MA, and BAC, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could Visa face a similar situation as it did in 2021 and underperform the S&P over the next 12 months – or will it see a strong jump?

The company posted mixed results in the third quarter of FY2024 (FY Oct-Sept), with earnings beating the consensus but revenues missing expectations. It reported net revenues (revenues minus client incentives) of $8.9 billion – up 10% y-o-y, driven by an 8% growth in the services revenues, followed by a 9% increase in data processing and a similar rise in the international transactions income. In terms of key metrics, payments volume increased 7% y-o-y, along with a 10% improvement in the number of processed transactions and a 12% rise in the cross-border. On the cost front, total operating expenses were reduced by 4% y-o-y in the quarter. Overall, net income grew 17% y-o-y to $4.87 billion. 

The top line grew 9% y-o-y to $26.3 billion in the first nine months of FY2024. It was driven by a 12% rise in data processing revenues, followed by a 9% gain in both the international transaction and service revenues. Further, operating expenses as a % of revenues were reduced over the same period, leading to a 15% increase in the net income to $14.43 billion.

Moving forward, we expect the fourth quarter revenues to be on similar lines. Overall, Visa’s revenues are forecast to touch $35.83 billion in FY2024. Additionally, Visa is expected to report an adjusted net income of $20.1 billion in the year. This coupled with an annual GAAP EPS of $9.88 and a P/E multiple of just below 31x will lead to a valuation of $305.

[1] Returns as of 8/13/2024
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates