After a significant dip in the previous four months to December 2021, in which Visa (NYSE: V) shares lost more than 20%, they are rallying again and have recovered some loss.
Referring to a longer period of the past 12 months, the US credit service company has lagged far behind the Nasdaq 100. Amid headwinds from the COVID-19 pandemic, record inflation may have impacted the stock performance.
There are conditions for the stock to return to its mid-July level when it hit an all-time high. So, I’m bullish on this stock.
Visa is a popular American credit services company, and a leader in the credit and debit card market.
Q4 2021 Earnings Results
In the fourth quarter of 2021, which ended September 30, 2021, key business metrics such as payment volume (up 17% year-over-year), total cross-border volume (up 38% year-over-year), and processed transactions (up 21% year-over-year), all meant that the company continued to recover from the damage caused by the pandemic.
In light of the above, adjusted earnings per share were $1.62, ahead of the consensus estimate by $0.08, on total revenues of $6.56 billion. Total revenue grew nearly 29% year-over-year, surpassing analyst forecasts by an average of $50 million.
The company returned $3.7 billion to shareholders through its own share repurchase and dividend payment programs. As for the dividend, executives have increased the distribution, and the quarterly dividend of $0.375 the company paid per common share on Decemver 7 reflects a 17.2% increase from the previous payment.
Positive Outlook
Mass vaccination is making good progress, so are pharmaceutical companies such as Merck (MRK) and Pfizer (PFE) in developing treatments to prevent serious illness from COVID-19. Although currently there are many infections from Omicron, the situation should improve.
After this pandemic wave, others may follow, but likely at a low intensity, so the need to reapply lockdowns and restrictions to stem the spread of the virus will diminish, fueling economic recovery.
So many sectors, such as HORECA (hotels, restaurants, catering) and cross-border airlines, will experience fewer and fewer interruptions in the future. These sectors are expected to give a huge boost to credit card and debit card payments going forward.
Wall Street’s Take
In the past three months, 13 Wall Street analysts have issued a 12-month price target for V. The company has a Strong Buy consensus rating, based on 13 Buys, zero Holds, and zero Sell ratings.
The average Visa price target is $273.46, implying 25.5% upside potential.
Summary
Had COVID-19 not impacted digital payments, Visa would likely have reached new highs after the mid-July peak. However, the situation with the coronavirus will improve globally, giving strength to the share price recovery.
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Disclosure: At the time of publication, Alberto Abaterusso did not have a position in any of the securities mentioned in this article.
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