Visa’s (V) stock has not moved since beating expectations across the board last week but thats because its hard for the market to be surprised by Visa’s strong growth. Priced on 27 times current year forecasts it already sports a very healthy valuation.
In Q2 the number of transactions processed rose 42%, revenues rose 23% and EPS rose 27% to $0.86 (beating expectations of $0.79). The company updated its guidance, saying it now expects adjusted profit at the higher end with a mid-teens percentage point increase.
Thats very nice and with a benign economic outlook its easy to see an increasing number of transactions pushing revenues higher. After all Visa has the largest global network of merchants and makes money as people spend.
However the main reason for Visa’s bright outlook is the secular shift from cash to cards. Most people dont realise that 85% of global transactions are still cash, meaning there is still a huge addressable market yet to be captured. Visa are making a grab for this and the extension of its partnership with Paypal to include Asia Pacific should facilitate significant growth.
Priced on 27 times current year forecasts Visa commands a large premium but as the market leader and with a huge untapped market it looks cheap.
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