It’s time to take a look at a major player in the payment technologies space. Here is the breakdown of $V, better known as Visa.
Current Price: $198.47
52/Wk High: $217.35
52/Wk Low: $133.43
Market Cap: $422.3 billion
Dividend: $1.28 / 0.64% Yield
Read below for the breakdown!
Visa is one of the best-known payment technologies companies in the industry with business segments spanning not only consumers but merchants, businesses, government entities, and much more.
In fact, Visa accounted for 70% of debit and prepaid transactions during the first half of 2020. Although Visa has a clear footing within the financial space, the company is still looking to expand its reach.
Recently Visa’s attempted acquisition of fintech company Plaid for $5.3 billion is catching headlines. Due to Visa’s already massive foothold in the financial industry, the DOJ has stepped in and raised antitrust concerns.
Not only is the DOJ lawsuit a major risk to the name in my opinion but the effects of COVID-19 on earnings have been significant. Digging into the company’s most recent earnings report, numbers took a major hit.
Firstly, Q4 net revenues came in at $5.1 billion, representing a significant -17% decline. Furthermore, GAAP net income decreased -29% to a dismal $2.1 billion, GAAP EPS declined -28% to $0.97, and non-GAAP net income declined -25% to $2.5 billion.
Secondly, Visa also finished down across the board in the fiscal year 2020, reporting net revenues of $21.8 billion representing a -5% loss. Furthermore, GAAP net income declined -10% to $10.9 billion, GAAP EPS declined -8% to $4.89, and non-GAAP net income declined -9% to $11.2 billion.
Thirdly, in Q4, payments volume increased 4%, cross border volume excluding Europe declined -41%, cross border volume totals declined -29%, and processed transactions increased 3%.
Finally, for the fiscal year 2020, payments volume increased 2%, cross border volume excluding Europe declined -22%, cross border volume totals declined -16%, and processed transactions increased 2%.
Shifting into the balance sheet the numbers are quite good.
Total Debt: $20.879 billion
Total Liabilities: $42.360 billion
Total Assets: $77.884 billion
Cash & Short Term Inv: $16.637
While the balance sheet looks solid, the valuation is quite expensive at the moment given that Visa is currently trading at a 40.67x price to earnings multiple and 11.73x price to book ratio.
Breaking the price of Visa stock down itself, 40.48% of the stock price is based on the company’s transaction fee segment. Furthermore, 36.43% is based on assessment fees, 18.28% on international fees, and 4.81% is based on service fees (data collected using @trefis (TREFIS)).
Given the numbers the analysts continue to be bullish with the mean price target currently sitting at $219.72/share, representing a 10.71% gain.
Visa’s high price target is $250.00/share, representing a 25.96% gain, while the low price target is $195.00/share, representing a -1.75% loss.
The big money on the other hand is very bullish, with 92.35% of Visa being owned by institutions. Top holders include The Vanguard Group, BlackRock Institutional Trust, and State Street Global Advisors.
Finally, digging into the technicals the stock has been relatively flat in recent months and could be presenting an opportunity. According to the six-month charts the MACD is currently running with downward momentum within a range of -2.26 down to -3.07 but is attempting to diverge back to the upside.
The six-month charts are also implying an RSI of 54.33 and CCI of 30.30, both of which are neither fantastic nor negative. It is also important to note that Visa currently trades roughly 19 points off its highs.
In short, I like Visa long term, especially if the Plaid acquisition goes through, but the DOJ lawsuit and COVID-19 pandemic are both major risks in the short term and are nothing to ignore.
In essence, a target entrance price for a long-term investment would in my opinion be $180/share if it sells back off to that level. Until then the stock is simply too high in my opinion and I would wait for a short-term pullback.
Disclaimer: This is not direct financial advice, simply opinion based on independent research.