Visa(US:V) ZACKS·2024-12-11 21:00Core Viewpoint - Visa Inc. demonstrates solid fundamentals with promising long-term growth potential, although its stock performance has lagged behind some peers in the financial transaction industry [1][2]. Group 1: Stock Performance - Visa's stock has increased by 20% year-to-date in 2024, compared to the financial transaction industry's average growth of 21.6% and the S&P 500's return of 27.4% [1]. - Competitors such as Mastercard and American Express have outperformed Visa, with gains of 24.1% and 61.3%, respectively [2]. - The stock is currently trading 1.6% below its 52-week high of $317.42, raising questions about whether to lock in gains or hold for further upside [5]. Group 2: Growth Drivers - Visa holds a dominant position in the U.S. payments market, controlling 47% of all U.S. credit card balances and 52% of the credit card market [6]. - In fiscal 2024, Visa reported net revenues of $35.9 billion, reflecting a 10% year-over-year growth, with adjusted EPS increasing by 15% to $10.05 [6]. - Key operational metrics include an 8% increase in payments volume, a 10% rise in processed transactions (233.8 billion), and a 15% boost in cross-border volume on a constant-dollar basis [6]. - The company generated $6.7 billion in operating cash flow and $6.4 billion in free cash flow for Q4 of fiscal 2024, indicating strong financial health [7]. Group 3: Shareholder Value - Visa returned $6.8 billion to shareholders in the most recent quarter through $5.8 billion in share buybacks and $1 billion in dividends [9]. - The company announced a 13% increase in quarterly dividends to 59 cents per share, yielding 0.76%, which is above the industry average of 0.67% [9]. Group 4: Earnings Estimates - The Zacks Consensus Estimate for Visa's fiscal 2025 and fiscal 2026 EPS suggests increases of 11.3% and 13%, respectively [10]. - Revenue estimates for fiscal 2025 and fiscal 2026 indicate growth of 9.5% and 9.9%, respectively [10]. - Visa has consistently beaten earnings estimates in the past four quarters, averaging more than 3% above expectations [10]. Group 5: Valuation and Challenges - Visa's forward P/E ratio is 27.22X, slightly above its five-year median of 26.88X and the industry average of 25.21X [11]. - The company faces challenges from rising expenses and potential regulatory hurdles, including an antitrust lawsuit filed by the U.S. Justice Department [12][13]. - The Credit Card Competition Act of 2023 may slow growth for Visa and Mastercard by fostering more competition in the credit card market [13]. Group 6: Investment Considerations - Visa's strong market position and financial stability make it an attractive stock for current investors, especially with the ongoing shift toward cashless payments [14]. - The stock trades below the Wall Street average price target of $327.09 per share, indicating a potential upside of 6.09% from current levels [15]. - Prospective buyers may consider waiting for a more favorable entry point due to the stock's elevated valuation and ongoing regulatory challenges [16].