Digital payments have surged in popularity thanks to advancements in technology that make transactions faster, easier, and more convenient. In fact, the digital payments market is expected to hit $17.72 trillion by 2024, according to Statista. But that's just the beginning.
The global digital payments market is forecasted to grow to $36.75 trillion by 2029, at a CAGR of 15.7%. As the world embraces digital finance, this explosive growth presents massive opportunities for Visa Inc. (V).
V is at the forefront of the digital payment revolution. From VisaNet, its transaction processing network, to offering credit, debit, prepaid cards, and Visa Direct, the company has become a payment powerhouse. V's innovative solutions and strategic partnerships have solidified its dominant position in the market.
Its impressive growth over the past year has been nothing short of remarkable. The stock soared 14.9% in just six months and 22.1% over the last year, closing at $313.01 in the last trading session. These gains reflect the company’s ability to ride the wave of digital payment growth and cement its leadership.
Now, let’s dig into the factors that could shape V’s performance in the near future.
Recent Developments
V’s recent initiatives are strategically positioned to strengthen its market leadership in digital payments.
On November 12, the company expanded its Flexible Credential program to the United States with Affirm and to the United Arab Emirates with Liv. The innovation allows customers to pay using multiple account funding sources with a single card, driving convenience and enhancing the appeal of cashless payments.
The move is expected to significantly boost V's market share and solidify its dominance in the evolving digital payments landscape.
Additionally, on October 29, V partnered with Coinbase, a leading platform for buying, selling, and managing crypto. Through the integration of Visa Direct, V now facilitates real-time account funding for crypto transactions, empowering eligible Visa debit card users on Coinbase to seize trading opportunities around the clock.
The collaboration positions V as a pivotal enabler in the expanding crypto market. Combined with its focus on innovative payment solutions, these strategic moves align with V's efforts to capture emerging trends and maintain its competitive edge in the evolving financial ecosystem.
Sound Historical Growth
Over the past three years, V has demonstrated consistent growth across key financial metrics. Its revenue grew at a CAGR of 14.2%, while EBITDA rose slightly faster at 14.6%. Operational income (EBIT) and total assets expanded at CAGRs of 14.8% and 4.5%, respectively.
Notably, net income surged at a CAGR of 17.1%, and EPS climbed even higher at 20%, showcasing robust profitability. The sustained performance underscores V’s strong growth trajectory and its ability to deliver solid results over time.
Strong Financials
For the fiscal fourth quarter that ended September 30, 2024, V’s net revenue increased 11.7% year-over-year to $9.62 billion. Its operating income grew 14.4% from the year-ago value to $6.35 billion.
Additionally, the company’s non-GAAP net income and non-GAAP EPS rose 12.6% and 16.3% from the prior year’s quarter to $5.43 billion and $2.71, respectively. As of September 30, 2024, V’s total assets amounted to $94.51 billion, compared to $90.50 billion on September 30, 2023.
Favorable Analyst Estimates
Analysts predict V’s revenue and EPS for the fiscal 2025 first quarter (ending December 2024) to rise by 8.2% and 10.4% year-over-year, reaching $9.34 million and $2.66, respectively. The company has exceeded the consensus EPS estimates in each of the four trailing quarters, which is noteworthy.
For the full fiscal year 2025 (ending September 2025), V’s revenue and EPS are expected to grow 9.7% and 11.6% from the previous year, reaching $39.39 billion and $11.22, respectively.
Plus, looking ahead to fiscal 2026, analysts anticipate further growth with revenue and EPS forecasted to rise by 10.2% and 12.9% from the prior year, reaching $43.40 billion and $12.67, respectively.
High Profitability
V’s trailing-12-month gross profit margin of 97.83% is 64.7% higher than the industry average of 59.42%. Its trailing-12-month levered FCF margin stands at 36.49%, 87.6% higher than the industry average of 19.45%.
Additionally, V’s trailing-12-month asset turnover ratio of 0.39x outperforms the industry average of 0.22x by 75.8%. Moreover, the company boasts a trailing-12-month net income margin of 54.95%, which is 150.2% above the sector average of 21.97%.
POWR Ratings Reflects Optimism
V’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
V boasts a B grade for Quality, supported by profitability metrics that outperform the industry average. Its B grade for Momentum further underscores strong technical performance, with the stock trading above its 50-day moving average of $292.12 and 200-day moving average of $278.57.
Additionally, V earns a B grade for Stability, consistent with its 24-month beta of 0.68, highlighting its lower volatility compared to the broader market.
Within the Consumer Financial Services industry, V is ranked #9 out of 47 stocks. Beyond what is stated above, we have also given V’s grades for Value, Sentiment, Growth, and Stability. Get all V ratings here.
Bottom Line
V has firmly established itself as a market leader in digital payments, leveraging innovative offerings and strategic partnerships. As digital payments continue to rise globally, V is positioned to capture a significant share of this expanding market.
Moreover, with high profitability, strong financials, and ongoing expansion initiatives that include tapping into emerging sectors like crypto, V's momentum is evident. Given these factors, V presents an attractive investment opportunity for those seeking growth potential in the rapidly evolving digital payments space.
How Does Visa Inc. (V) Stack Up Against Its Peers?
Although V’s near-term outlook appears sound, it may be worthwhile to explore its industry peers, who currently exhibit even stronger POWR Ratings. So, consider these A (Strong Buy) stocks from the Consumer Financial Services industry:
360 Finance, Inc. (QFIN)
Atlanticus Holdings Corporation (ATLC)
Regional Management Corp. (RM)
To explore more A or B-rated Consumer Financial Services stocks, click here.
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V shares were unchanged in premarket trading Wednesday. Year-to-date, V has gained 21.15%, versus a 28.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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