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Visa: Charging Ahead in Global Payments
09/19/2018 5:00 am EST
As global payment patterns keep shifting from cash to digital networks, Visa (V) is one of the companies that stands to benefit immensely, asserts growth stock expert Todd Shaver, editor of Bullmarket.com.
There’s a lot of money left in cash and a lot of growth on the table for Visa. Roughly 85% of the global payment transactions still involve cash and checks, which means there is plenty of room for market expansion as the world continues to shift toward digital transactions and mobile payments.
Visa is also benefitting from a robust global economy since a strong economy means more money is flowing. U.S. GDP growth reached 4.2% in 2Q18 and the personal consumption growth rate reached 3%. Those numbers are expected to continue to rise, which will be a strong boost to Visa’s revenue, given that 44% of transaction volume occurs in the United States.
Globally, the consumer confidence index remains high, and given that digital and mobile payment transaction rates are ramping up faster in foreign countries than they are in the U.S., surging consumer confidence overseas also bodes well for Visa’s bottom line.
Management isn’t resting on its laurels. The company is proactively developing new payment methods as well as investing in and partnering with future leaders of the digital payment industry.
For example, the company recently invested in Paidy, Japan’s first credit provider that does not require pre-registration or a credit card to use the service. Paidy has over 1.5 million users and Japan is one of the world's fastest growing e-commerce markets with overall transaction volume swelling 9% to $150 billion in 2017.
Meanwhile Visa remains an established payment option on next-generation platforms such as PayPal, Apple Pay and Google Wallet. These aren’t competitors so much as new portals to the Visa universe. We can’t help but notice that the company also owns 4.2 million shares of Square (SQ).
Many are speculating that Visa may eventually acquire the startup, something for investors to keep an eye on. Either way, as these payment platforms prosper, they feed money to Visa. It’s a win-win situation.
The fundamentals continue to outperform. Revenue last quarter increased 16% to $5.2 billion from $4.6 billion last year, which is extraordinary for such a massive company and nearly double what a typical S&P 500 constituent can provide.
EPS increased 40% year-over-year to $1.20. With cash flowing that fast, the stock is also one of Wall Street’s biggest winners, having surged nearly 40% over the past year and hitting records practically every week. Even so, the stock is far from expensive on a growth-adjusted basis.
Visa combines the established blue-chip profile of a global household name with the dynamism of a startup, albeit at a value of over $315 billion. We love those stocks more than any others. Management is forward looking and not shy about investing in companies like Paidy and Square that have an edge in new payment systems.
The mature worldwide brand gives us stability, and the growth profile speaks for itself. We can’t say enough good things about this shining star. At the rate it has been moving, we’ll hit our $170 target before you know it.
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