Visa Is Up By 8%, Here Is Why

Key Insights

• Visa beats analyst estimates on both earnings and revenue. 
• The company expects that robust travel demand will boost its results. 
• General market weakness is the main risk for Visa stock. 

Visa Rallies After Strong Quarterly Report

Shares of Visa gained strong upside momentum after the company released  its fiscal Q2 2022 results. Visa reported revenue of $7.2 billion and adjusted earnings of $1.79 per share, beating analyst estimates on both earnings and revenue.

Visa noted that it “had solid growth in most countries around the globe and across all elements of our business, with revenue growth of over 20% in consumer payments, new flows and value added services”.

The company believes that additional growth will be driven by the robust travel recovery. It should be noted that expectations of such a recovery have already provided significant support to airline stocks, which are very sensitive to travel demand outlook.

What’s Next For Visa Stock?

Analysts expect that Visa will report earnings of $7.06 per share in the current fiscal year and earnings of $8.33 per share in the next fiscal year, so the stock is trading at 26 forward P/E.

This is not cheap, but traders are ready to pay a premium for Visa’s leading position in the payments market. Analyst estimates have been moving lower in recent weeks, but this trend could change after the release of the better-than-expected quarterly report.

I’d also note that concerns that established leaders like Visa and Mastercard could be displaced by new companies have subsided. Stocks like Affirm , which provides BNPL (buy now, pay later) services, have crashed from their recent highs, and it looks that some capital has flown into the stocks of established players.

While Visa’s performance was strong, traders should note that current valuation levels do not provide a material margin of safety. In case the general market pullback continues, Visa stock will move closer to recent lows.

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