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Visa has Ample Scope for Future Growth
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Visa has Ample Scope for Future Growth

Visa Inc (V), a digital payments firm, has enjoyed spectacular growth since its first day of trading on the New York Stock Exchange (NYSE).

With a market capitalization of $514 billion, the share price of Visa gained almost 13% in one year and jumped almost 191% over the past five years. (See Visa Dividend Date and History on TipRanks)

The growing digital payment market, an incursion into the NFT sector, an increase in consumer spending, better-than-expected fiscal Q3 results, Visa’s acquisition strategy, and other innovative initiatives make it a safe bet stock. I am bullish about the stock as a result of these considerations.

Visa Forays into the NFT World

Visa has paid roughly $150,000 to purchase a CryptoPunk 7610, a one-of-a-kind digital collectible character, in order to profit from the rising non-fungible token (NFT) market.

NFT is a one-of-a-kind digital asset that signifies virtual item ownership. These tokens are valuable because of their uniqueness.

Visa’s crypto head, Cuy Sheffield, said in a blog post, “We think NFTs will play an important role in the future of retail, social media, entertainment and commerce.”

He further added, “To help our clients and partners participate, we need a firsthand understanding of the infrastructure requirements for a global brand to purchase, store, and leverage an NFT.”

According to sales data, the market for NFTs reached new highs in the second quarter, with $2.5 billion in sales so far this year, up from $13.7 million in the first half of 2020.

As the NFT market is witnessing strong demand, Visa could earn a hefty amount from it in the future.

Acquisitions to Enable Business Expansion

The company is acquiring small businesses to gain scale and a larger market share in the payment industry.

Visa recently agreed to pay €1.8 billion for Tink, a European open banking platform, and £700 million for Currencycloud.

The Tink acquisition is intended to accelerate the adoption of open banking in Europe, while the Currencycloud acquisition is expected to boost Visa’s foreign exchange capabilities.

Strong Q3 Earnings Picture

For the fiscal third quarter, the company delivered better-than-expected results. Visa’s strong performance was fueled by an increase in net revenues.

Quarterly net revenues jumped 27% from last year to $6.1 billion and also surpassed the consensus estimate of $5.8 billion.

The increase in net revenues is primarily due to an increase of 11% in payments volume, 53% in international transaction revenues, and 39% in data processing revenues.

Earnings per share came in at $1.49, up 41% year-over-year, beating the consensus estimate of $1.34.

What are the Analysts Saying?

Post the earnings announcement, MoffettNathanson’s analyst Lisa Elis was bullish on the stock and maintained a price target of $300.00. This implies 28% upside potential to current levels.

Elis expects the company’s earnings to increase for fiscal 2021 as well as for 2022. She commented, “We expect Visa to benefit from a pandemic-driven acceleration in cash displacement, with potential upside from Visa Direct and a recovery in travel.”

Another analyst Ashwin Shirvaikar of Citigroup reiterated a Buy rating on the stock but increased the price target to $288.00 from $283.00. This implies a 22.9% upside potential to current levels.

Shirvaikar said Visa’s strong Q3 results were driven by improved spending trends in the June quarter.

The Final Verdict

While cash payments are still common in developing nations, credit card usage is expanding as the world becomes more digitalized, and Visa is well-positioned to profit from this trend.

Visa stock commands a Strong Buy consensus rating, based on 21 Buys and 1 Hold.

As for price targets, the average Visa price target is $280.90 per share, implying around 19.9% upside potential from current levels.

Further, the stock’s TipRanks SmartScore, which comprises 8 unique data sets, indicates that the stock has strong potential to outperform market expectations.

Apart from the above-mentioned strong fundamentals, Visa has plenty of room to expand in the digital payments industry while also pursuing new bets in fintech, cryptocurrencies, and now NFTs.

Disclosure: At the time of publication, Shalu Saraf did not have a position in any of the securities mentioned in this article.

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