Visa Stock Analysis: Strong Global Growth Will Push V’s Stock Price Higher

This article was written by David Berger, a Financial Analyst at I Know First

Visa Stock Analysis

Summary:

  • Strong earnings reported on July 20 and high expectations for Q4 and 2018 fiscal year
  • Global initiative to remove cash from the global economy

Visa Inc. (NYSE:V) is an American multinational financial services company. Visa enables electronic fund transfers through Visa-brand credit and debit cards. It is the second largest credit/debit card company in the world, behind China UnionPay. Visa does not offer its own lines of credit. Rather, the firm provides financial institutions with Visa-brand payment products through which these institutions offer credit, debit, and other services to their customers. Visa was founded in 1958 and is headquartered in Foster City, California. 

Visa Crushes Earnings Once Again

Visa Stock Analysis

To no surprise, Visa dominated its earnings once again. V has beaten earnings in each of its last 4 quarters, continuously proving analysts wrong. Q3 earnings, reported on July 20, beat analyst expectations by $0.05. Not only has Visa continued earnings growth, revenue has steadily been increasing the last 3 years. This revenue increase has allowed Visa to expand globally, including its purchase of Visa Europe.

“I’m pleased to report Visa’s fiscal third quarter results which reflect strong growth in payments volume, cross-border volume, and processed transactions, which were powered by economic tailwinds in the U.S. and globally,” said Alfred F. Kelly, Jr., CEO of Visa Inc. “Our results and growth are a reflection of our strategy to pursue the conversion of cash and checks to electronic payments in partnership with our clients around the world.”

While that is all in the past, Visa’s future looks just as bright. Analysts have bumped up expected earnings per share (EPS) to $0.85 for Q4, and to $3.42. While this seems strong in terms of growth, expected earnings for 2018 fiscal year are even higher. Accordingly, analysts project V’s EPS for 2018 at $3.99, a 17% increase year over year. A 17% increase may seem dramatic, but Visa has hit numbers like this in the past. Therefore everyone, not just analysts, should be bullish about Visa’s future.

Global Cash and Check Initiative

Visa Stock Analysis

Visa has declared a war on cash. Despite the improbability of the task, V wants to fully eliminate cash purchases and focus on pushing clients to consistently pay with their Visa credit and debit cards. In Visa’s Q3 investor conference call, it noted that the opportunity to globally remove cash and check purchases was worth $17 trillion. Yes, with a “T”. No wonder Visa is dying to push a cashless initiative across the world. Additionally, the global economy is expected to rise 2.7% in 2017 and 2.9% in 2018, so there may be even more value in pushing a cashless future.

Furthermore, according to Visa, Asia has the largest growth potential in this market at $6.1 trillion. Europe, North America, Eastern Europe/Middle East/Africa, and Latin America expect to have cashless markets worth $3.5 trillion, $3.2 trillion, $2.4 trillion, and $1.8 trillion, respectively. The United States had the largest Visa growth during the e-commerce boom of the 1990’s. However, developing countries across the world are using more Visa products as they advance in technology, specifically Asia and Africa.

Visa Inc’s purchase of Visa Europe is a strong play in eliminating cash and pushing this cashless initiative in Europe. Visa Europe was the leading card in Europe, with over 500 million cards issued. This deal is extremely fundamental to Visa’s future, even though it closed in 2015. Visa continues realizing synergies from this deal, even two years removed. Additionally, Visa is now partners with Paypal in Europe after previously only being partners in the U.S. and Asia. If V can successfully remove cash from the European economy, it could force surrounding continents that trade with Europe to do the same.

Therefore, given all of these points, I give a bullish prediction for V. This assessment is backed up by the positive algorithmic forecasts from I Know First. Over the next few months and the next year, V’s share price will rise.

Visa Stock Analysis

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm, allowing the user to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above in order to fill confident about/trust the signal.

 Visa Stock Analysis

Past I Know First Performance on V

I Know First has been bullish on AMD shares in the past. In one such case, on September 22, 2016, the I Know First algorithm issued a bullish forecast for Visa Inc. (NYSE: V). V had a 1 Year signal of 215.30 and a predictability of 0.40.

Visa Stock Analysis

 

In nearly a one year time span, the stock rose 20.15%, beating the S&P 500 return of 14.51%.

Visa Stock Analysis

 

This forecast for V was sent to current I Know First subscribers on September 22, 2016. To subscribe today click here.


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