As consumers make purchases, their transactions have to be processed by a protected and centralized entity. This is where Visa Inc. (V) comes in. The credit card company’s business fundamentals are beginning to recover after a suppressing COVID-19 pandemic, and now-decelerating ecommerce trends. The company reported earnings this past week, and although it did beat on its past earnings, its guidance remained conservative. (See Analyst’s Top Stocks on TipRanks)
Dan Dolev of Mizuho Securities delivered a report on the large multinational, writing that the prevalence of credit usage is returning to its pre-pandemic levels, and could be boosted by a recovering travel industry as well. The question from him was, “Will the stock play along?”
Dolev assigned a Buy rating on the stock, and calculated a price target of $275. This target suggests a potential 12-month upside of 27.44% from current levels.
The four-star analyst asserted that the lower-than-expected guidance in the earnings print also translates to a possible easy beat in that metric, come Q4. For Dolev, strong Visa revenue performance hinges on a faster-than-expected recovery in the travel industry.
Travel is currently forecasted to return to 2019 levels by the summer of 2023. This is due, in part, to the higher take rate derived from most travel expenses.
Visa is currently experiencing “accelerating card penetration and a boost to US volume growth,” according to Dolev. Additionally, the company is seeing buy-now-pay-later (BNPL) payments, most of which is conducted via cards. However, there is a trend of processing volume moving toward using automatic clearing houses instead of Visa cards for some BNPL firms. This could spell risk for Visa, which has been benefitting from the alternative payment ecosystem.
Taking a look at TipRanks’s website traffic data, total device visits to usa.visa.com declined quarter-over-quarter by 9.51%. Meanwhile, the share price fell 4.60% over that same period. When comparing the 2021 year-to-date period to the same one over 2020, visits to Visa’s website decreased 3.26%.
Disclosure: At the time of publication, Brock Ladenheim did not have a position in any of the securities mentioned in this article.
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