Visa's Real Power Is Embedded In Long-term Secular Shift From Paper Currency: Analyst

Oppenheimer analyst Dominick Gabriele reiterated the Outperform rating on Visa Inc. V, with a price target of $297. 

Per the analyst, the company’s cash and check opportunity remains vast.

Value-added-service (VAS) growth is likely to remain robust, while weakness in new flow growth in 1Q24 was largely due to one-time items and grow-over impacts, the analyst adds.

VAS is expected to grow above the consumer payments growth rate, and the total VAS growth spread is expected to be between open banking, risk, and advisory. 

Overall, Gabriele highlights Visa’s powerful brand, vast global acceptance network, and strong business model. 

According to the analyst, the company is well-positioned to benefit from the long-term secular shift from paper currency (cash/check) to plastic (electronic payments), consumer spending growth, and increased globalization. 

The company has a strong franchise in the US and garners an increasing proportion of growth from international markets, noted the analyst. 

He adds that Visa as a company feels strongly about its capability advantage over PIN debit while smaller merchants are not likely to take the online transaction risk of PIN debit born by the merchant.

Visa does not issue cards or extend credit, and it has one of the most attractive business models under the analyst’s coverage, Gabriele adds.

For the second quarter, the analyst projects the company’s adjusted earnings per share to be $2.44.

Visa’s Stock Prediction For 2024

Visa’s revenue growth in FY23 was 11.41%, reflecting the influence of various factors including the macroeconomic environment, demand for its products and services, and its position relative to competitors. This growth is a critical indicator for investors assessing the company’s future prospects.

Some macro factors that could impact the company's performance in the next year include higher interest rates, progress on reeling in inflation and labor market strength. The Fed's benchmark rate is currently at 5.33%, while PPI recently came in at -0.1%, growing 2.0% from last year. The unemployment rate was most recently reported as 3.7%.

An investor should pay attention to economic conditions to decide whether they think the macro environment is positive or negative for Visa stock. For real time economic data and breaking market updates, check out Benzinga Pro. Try it for free.

How does this stack up against Visa's peers?

Investors may also want to analyze a stock in comparison to companies with similar products or in similar industries. Visa operates in the Financials sector. The stock has experienced average annual growth of 9.39% compared to the -17.89% average of its peer companies. This is below the broader sector movement of Visa.

Price Action: V shares traded lower by 0.63% to $274.69 on the last check Monday. 

Image: Shutterstock/ Tony Stock