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Visa (NYSE:V) Delivers Excellent Earnings Despite Catastrophic Conditions

Friday, January 29, 2021 | Steve Anderson
Visa (NYSE:V) Delivers Excellent Earnings Despite Catastrophic Conditions

Even the most casual observer likely already knew that Visa (NYSE:V) was a pretty safe stock to pick up. The last year for Visa has proved that point with almost staggering abundance. The latest earnings report issued from the company only adds icing to an already rich fiduciary cake and shows us what a real market powerhouse looks like.

Beating Expectations All Over, Even in Bad Times

Visa turned in a solid quarter, though not as solid as some previous quarters had seen. Earnings came in at $1.42 per share, which was above the estimates of $1.28 per share. Revenues also beat expectations, coming in at $5.69 billion against an expected $5.53 billion.

That's good news objectively, but less so when compared to previous years that had never heard of COVID-19. The same period last year saw net revenue fully 6% higher than it came out this year, and even adjusted net income came in 4% lower in the same time frame.

Visa suffered from many of the same problems—and advantages—that hit American Express (NYSE:AXP). While travel and entertainment spending were down, e-commerce spending was up substantially, and Visa benefited accordingly. CEO Alfred Kelly pointed to a combination of factors helping Visa, including “sustained strength of debit and e-commerce,” as well as “resilient domestic spending.” However, cross-border volume was seriously hurt. Without considering traffic within Europe, the number was down a full third, 33%. Including Europe makes the losses slightly more bearable but still deep at 21% overall.

However, it became clear that Visa did indeed have a fairly solid quarter, as it announced plans to start up a stock buyback plan. The new plan will allow for $8 billion to be spent buying back Visa stock, and when you consider previous buyback authorizations that went unused, Visa has a little over $11 billion total to drop on stock.

Analysts Are Already On Board

The broader analyst pool, meanwhile—as based on our latest research—is not only already on board with Visa, but it's been there for months. Visa stock is currently rated a “buy”, and it's been so for the last six months, with the ratios comprising that “buy” steadily improving. Six months ago, the company had five “hold” ratings and 22 “buy” to its credit. Three months ago, that improved to five “hold” and 24 “buy”. It maintained that ratio going into a month ago, and now, the company has just four “hold” ratings and 26 “buy” ratings to its credit.

The price target has been steadily climbing for that same time, though at varying levels. Six months ago, it stood at $208.58 before climbing to $218.07. A month ago, it stood at $220.03 before reaching today's price target of $223.03. The price target may not have been climbing much, but climb it has for the last several months regardless.

A Great Time to Get In

Here's the particularly good news about Visa: it's weathered one monster storm, and there are at least some signs suggesting that many of the problems that hampered Visa—and pretty much everyone else in the credit card space—are at least reduced in severity. Visa has been hit by travel and entertainment restrictions like anyone else, but with even some of the biggest government holdouts visibly reconsidering their positions, getting people back out into the field and spending money again seems like much less a long shot than it did this time last year. While this will pull back some online spending, especially since it will no longer be the only option, it will allow brick-and-mortar spending to kick back in on at least some level.

While certainly, Visa has been hurt by the past year's highly unusual circumstances, it fell from a higher point that much of its competition, with the exception of Mastercard (NYSE:MA). It will likely also be able to rebound more quickly, and with around $11 billion set to go into stock buybacks, seeing an upturn in share price isn't out of line either. Visa already stood a good chance of recovery thanks to general market conditions, and with the company planning to aggressively buy its own shares, the current share price might be blown away rather quickly.

Visa has not only demonstrated that it's a stronghold in bad times, but also that it's likely to recover quickly in good times. That's a pretty strong recommendation for buying right there, so if you're looking to augment your portfolio with a proven winner, there are much worse choices out there than Visa would ever be.

Featured Article: Systematic Risk and Investors

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After a year like 2020, many Americans figure that just getting to 2021 was enough. But for many people, the start of a new year still means making resolutions. And while many Americans are still waking up to Groundhog’s Day, there is hope that things will look dramatically different in September than they do right now.

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Visa (V)2.6$226.94flat0.56%46.50Buy$246.32
Mastercard (MA)2.1$362.50-0.4%0.49%54.35Buy$386.36
American Express (AXP)1.9$156.88-0.2%1.10%38.93Hold$125.75
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