Visa Keeps Charging Ahead

02/20/2020 5:00 am EST

Focus: FINANCIALS

Todd Shaver

Founder and Editor-in-Chief, BullMarket.com

Visa (V) is trading near record heights; in the last year, the stock is up 47%. This is even more impressive when you consider Visa is a six-decade-old company, a time when many companies enter the mature phase that is categorized by slower growth, asserts Todd Shaver, editor of BullMarket Report.

That is hardly the case here. Visa is a leader in digital payments, facilitating transactions around the world between consumers and businesses through its secure and reliable payments network.

Last year, Visa concentrated on growing digital payments utilizing the advancement of technology, including mobile and 5G networks. To capitalize, management is focused on investing in its core business, which is credit, debit, and prepaid cards.

There is a huge opportunity for Visa to convert the $17 trillion in consumer spending and $20 trillion in business-to-business spending done in cash and checks.

Revenue and earnings continued to grow in fiscal 1Q20 (ended December 31, 2019). Quarterly revenue and profits both increased by 10% compared to 1Q19. The top-line was $6.1 billion versus $5.5 billion and income rose from $3.0 billion to $3.3 billion.

Last month, management announced a deal to acquire Plaid, a leading technology provider that connects consumers with financial technology (fintech), for $5.3 billion. Although initially dilutive to EPS, the acquisition will provide longer-term benefits.

Plaid is a dominant player in the industry, with 75% of fintech providers using its solutions to connect with consumers’ financial institutions (e.g. bank and brokerage accounts).

Plaid is used by financial apps such as Acorns, Betterment, Venmo, and many of the largest banks that make it convenient for consumers to connect their financial accounts with the app of choice.

Visa’s size and established market position make it tough on competitors. There simply aren’t many companies that can keep up with Visa.

The tailwinds at their back are strong and sustained, moving the stock in the right direction. After reporting 1Q20 results, we raised our target price from $200 to $230. Our Sell Price? We wouldn’t think of selling Visa.

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