The company posted a profit of $3.8 billion, or $1.79 per share, against $3.0 billion. Having handily beat estimates on top and bottom lines, the stock popped by over 8% following the results.
There were plenty of uncertainties surrounding the company during the lead up to the results, with the war in Ukraine, supply chain disruptions, the exit from Russia, and rising interest rates weighing down on the stock. Visa, however, emerged unscathed with no evident impact on its global payment volumes from any of the above. In fact, it witnessed broad-based growth across all key metrics and segments.
During the quarter, the company witnessed a 17% growth in total payment volumes, 19% increase in total transactions processed at 44.8 billion, and a 38% jump in cross-border payment volumes, led on by a continued recovery in global travel. While the company is yet to realize the overall brunt of its exit from Russia, it remains confident that the lost revenue can be offset with other favorable macro dynamics.
Beyond travel, the company continues to gain from a broad-based secular shift towards cashless payments throughout the world. Fueled by the pandemic, Visa and its peers such as Mastercard (MA) and PayPal (PYPL) continue to see persistently high payment volumes driven by a shift in consumer habits that is unlikely to revert back even as the pandemic subsides.
Visa continued to expand its reach with partnerships, acquisitions, and collaborations. Over the past few months, the company has been collaborating with various governments, pitching the idea for a central bank digital currency. It has since renewed its partnership with Amazon (AMZN), for the issuance of the Amazon Prime Visa Signature Card, as well as the global acceptance of Visa across all Amazon stores.
The company’s Visa Direct payments network continues to gain traction, with PayFare, a digital banking solution for gig workers, and Payoneer, now using Visa Direct on their platforms. During the quarter, Visa closed the acquisition of Tink, an open banking platform that allows the development of fintech apps with the use of a single API, already integrated with over 3,400 banks across Europe.
Following a major correction in recent months, the stock is down by a respectable 12% from its peak in July, effectively trading below pre-pandemic levels despite substantial growth in revenues, payment volumes and customers since then. This makes it a perfect growth investment, with YoY growth rates in excess of 20%.
Given the company’s strong cash flow position and a robust balance sheet with $16 billion in cash and $21 billion in debt, Visa continues to enhance shareholder returns with buybacks - $2.9 billion worth of buybacks during the quarter alone, and another $9.7 billion worth of pending authorizations. With this, we reiterate our price target at $265, with no intention of ever selling this company.