Visa is Thursday's IBD Stock Of The Day. The Dow Jones payments giant was largely detached from the banking crisis. Visa stock is nearing a buy point as transaction volumes improve, led by cross-border fees.
Visa was unfazed by the recent banking crisis sparked by SVB Financial's Silicon Valley Bank. The bank failure sent shock waves through financial markets, forcing regulators to scramble for emergency relief and prompting calls for stricter legislation for the industry. Midsize banks bore the brunt of losses during the March mayhem, while credit card companies like Mastercard and American Express faced more modest declines.
"Things have been completely normal," Visa Chief Financial Officer Vasant Prabhu said at the Wolfe Research conference on March 15. "Debit and credit cards have been usable, without any disruption whatsoever. They're settling every night. So, really, no impact whatsoever."
Visa and archrival Mastercard don't carry card balances on their books, unlike American Express and Discover Financial. Issuing banks such as JPMorgan Chase carry the upside and downside. Instead, Visa and Mastercard make money on credit and debit card transaction fees.
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Payments Update
Visa's U.S. payments volume increased 11% year over year in February, according to the company's most recent update on March 3. Credit card payments grew 10% and debit volume rose 11% year over year.
Mastercard Chief Product Officer Craig Vosburg said during the conference that "current products continue to operate normally," and the payments company is encouraged by regulatory actions.
Cross-border transaction volume continues to spike as international travel improves as the coronavirus pandemic wanes. February cross-border volume, excluding intra-Europe transactions, was 148% of 2019 levels, Visa reported. Total travel cross-border volume excluding intra-Europe transactions was 131% of 2019 levels. Visa noted cross-border volumes in Asia continue to improve compared to 2019 levels while U.S. volumes improve at a more modest pace.
The "broadly positive" update suggests more upside to first-quarter estimates, Jefferies analyst Trevor Williams wrote in a research note following the report. The announcement signals ongoing U.S. consumer strength and improving cross-border volumes, he wrote. Williams projects at least 3% upside to Wall Street estimates for international transaction fees and data processing revenue. Jefferies maintained its buy rating on Visa stock with a $260 price target.
Meanwhile, analysts expect Visa earnings to jump 10.6% to $1.98 per share in fiscal Q2 on 8.2% revenue growth to $7.78 billion. International transaction fees are seen driving growth, spiking 23% to $2.72 billion. Data processing fees should rise 8% to $3.76 billion.
Wall Street sees Mastercard earnings dipping 1.8% to $2.71 per share for its upcoming Q1 report while revenue surges 8.4% to $5.64 billion.
Visa Stock
Visa stock fell nearly 1% to 225.99 on Thursday. Shares are consolidating with a 234.40 buy point based on the current pattern. V stock appears to be working on a handle that would provide a lower entry, but needs at least two more trading days to form. Visa stock is holding above its major technical lines.
The current base is within a long, deep consolidation going back to July 2021.
The credit card company has a 92 EPS Rating out of a best-possible 99 after averaging 30.7% earnings growth over the past seven quarters. Visa's relative strength line is off highs from the beginning of January. But Visa stock has an 85 RS Rating, indicating it is outperforming a majority of market peers. Visa stock has a near-perfect 96 Composite Rating, which combines a number of technical indicators into one easy-to-read score.
Mastercard stock, meanwhile, is trading in a double-bottom base with a 369.25 buy point according to MarketSmith. Shares fell 0.6% to 361.47 on Thursday, but rebounded to close above the 50-day moving average.
V stock ranks No. 2 in the Finance-Credit Cards/Payments Processor Group according to the IBD Stock Checkup. It trails only fast-growing smaller payments firm Shift4.
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