Visa Stock (NYSE:V) appears positioned to maintain double-digit growth for years to come. The payment network giant experienced a modest revenue slowdown last year, leading some investors to expect growth to fall into the single digits. However, Visa’s most recent results were strong, suggesting that double-digit growth will continue at some point. In fact, Wall Street is predicting that trend will continue for years to come, reinforcing Visa’s bullish stance. That’s why I’m bullish on V stock.
Q2 Results: Visa Prepares for Another Great Year
Visa’s fiscal Q2 results have revived investor confidence in the stock. The company’s growth remained in the double digits, a trend that is expected to continue despite earlier signs of a potential slowdown. Particularly because Visa’s revenue had been consistently declining in previous quarters, many investors expected Visa’s full-year revenue growth to come in below double digits. If you look at each quarter’s revenue growth between Q4 2020 and Q1 2024, you’d certainly get that impression.
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Q4-2020: 28.6%
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Q1:2021: 24.1%
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Q2-2021: 25.5%
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Q3-2021: 18.7%
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Q4-2021: 18.7%
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Q1-2022: 12.4%
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Q2-2023: 11.1%
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Q3-2023: 11.7%
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Q4-2023: 10.5%
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Q1-2024: 8.8%
Fortunately, Visa’s Q2-2024 results have offset this slowdown. Growth rebounded sequentially to reach 9.9%, while continued momentum points to further gains in the second half of the fiscal year. To break down this quarter’s results, Visa’s revenue growth was driven by certain key factors. These primarily include robust payment volume, an increase in processed transactions, and a notable increase in cross-border volume.
In terms of payment volume, Visa recorded an 8% year-on-year increase on a global scale, which was consistent with the growth in Q1. Transactions processed also saw an 11% year-on-year increase, highlighting the steady increase in the number of transactions processed across Visa’s network. Finally, cross-border volume, excluding intra-Europe, grew 16% year-on-year in constant currency, reflecting a booming tourism and travel industry overall.
These increases in turn drove Service revenue up 7% year-over-year, closely aligned with the 8% growth in constant dollar payment volume compared to Q1. The increase in processed volumes also drove a 12% increase in Data Processing revenue. Finally, growth in cross-border transactions drove a 9% increase in International Transaction revenue, although this was somewhat offset by softer currency volatility compared to last year.
Given the current momentum, management now expects revenue growth in the low double digits for the second half of the year, which would push Visa’s full year revenue growth into the double digits as well. On the one hand, total payment volume growth is now forecast to be in the high single digits instead of the previously forecast low double digits.
This reflects some slower-than-expected trends in Asia. On the other hand, cross-border volume, ex-intra-Europe, is expected to continue to grow robustly in the mid-teens, with e-commerce strength offsetting weaker travel-related cross-border volume in Asia.
As a result, Wall Street expects Visa’s full-year revenue to grow 10% to $39.5 billion. Importantly, consensus estimates point to continued double-digit revenue growth at least through fiscal 2026, evaporating earlier concerns about a potential slowdown into the single digits.
Growth, Valuation, Support Bullish Case
Given Visa’s continued growth trajectory and favorable estimates, coupled with its current valuation, I have confidence in the strength of the bullish outlook. Essentially, Visa’s scalable, high-margin business model allows for margin expansion over time, allowing net income growth to outpace revenue growth. Combined with the company’s periodic share buybacks, Wall Street expects a 13.2% compound annual growth rate (CAGR) in earnings per share (EPS) over the next five years. To me, this makes the stock’s forward price-to-earnings multiple of 25.5x quite attractive, especially given Visa’s moat and overall qualities.
Is Visa Stock a Bargain According to Analysts?
As for Wall Street’s view on the stock, Visa has a Strong Buy consensus rating based on 19 Buys and three Holds assigned over the past three months. At $316.63, the average Visa stock price target implies 18% upside potential.
If you’re not sure which analyst to follow when buying and selling V stock, the most profitable analyst following the stock (over a one-year time frame) is Sanjay Sakhran of KBW, with an average return per rating of 19.22% and a success rate of 89%. Click on the image below to learn more.
The takeaway meal
Visa’s robust performance and promising growth outlook highlight its potential to sustain double-digit revenue growth in the coming years. The company’s strong second-quarter results, driven by increased payment volumes, transactions processed and cross-border activity, have bolstered investor confidence in the stock. With Wall Street’s forecast further supporting this theme and Visa’s valuation looking attractive relative to forward estimates, the bullish scenario seems stronger than ever.
Revelation
