Visa (V) stock forecast: Can cashless payments keep up momentum?
World leading payment service provider Visa (V) has seen its stock price rise more than 17% in the last two weeks to be worth $218.5 today (23 March).
Prior to this it had taken a hit after suspending all of its operations in Russia in response to its invasion of Ukraine. That announcement deepened the slide the stock price had been experiencing over the previous month where it had fallen 18% from $235.85 to $191.7.
That slide included the market's disappointment when the company reported revenues had risen just 25% in its first quarter when analysts were expecting better.
Revenues rose to $7.1bn thanks mainly to an increase in cross border trade and eCommerce payments. The total number of transactions rose 21% to 47.6 billion in the three months to 31 December.
The company's expectation for revenue growth in the second quarter is "at the high end of the high teens".
In 2021 Visa handled 164.7 billion transactions. Despite reducing international traffic, the pandemic was cited as accelerating the move to cashless and online payments, Visa recorded record global payments of $2.8trn in Q4 2021.
But as Visa’s business hinges on transactions, it heavily depends on how consumer spending will keep up momentum as economies grapple with both covid, interest rate rises and inflation. We look at what factors are shaping Visa (V) stock forecast.
Visa stock: Technical analysis
The stock reached an all-time high of $250.93 on 27 July 2021, before plunging down to $190 at the start of December 2021. At the time of writing (8 March 2022), Visa’s share price sits at around $190.
As Visa is in the transactions business, its results typically mirror consumer confidence, and 2021 saw demand fluctuate as consumers grappled with lockdowns, supply chain constraints, inflation and a late surge of Omicron.
Investors were underwhelmed by full-year results released in October, and the share price dropped by 4.5% within 24 hours. Visa stock made the news when a spat with Amazon over credit card fees dented investor confidence in November, causing the share price to dip to almost 20% below its July high.
Visa’s Retail Spending Monitor estimated that year-on-year holiday spending would be up by 3.5%, driven largely by growing e-commerce sales. These happier holiday figures saw Visa stock value rebound above $210 in December as 2021 drew to a close.
The relative strength index (RSI) for Visa shares is currently bullish at 27.03, signalling the price is more likely to see an upward movement price rather than another drop. An RSI reading of 70 or above indicates that an asset be overbought or overvalued, while a reading of 30 or below suggests an oversold or undervalued condition.
Results beat expectations but share price wobbles
Visa reported full-year results for 2021 on 26 October. Transactions for Q4 2021 were up 21% on the prior-year quarter, and payments volumes saw a 17% increase over the same period.
Though reported earnings per share (EPS) of $1.62 beat analyst expectations of $1.53, the share price still dipped following the results announcement.
Plastic power
The final quarter of 2021 saw Visa report record global payments of $2.8trn as the pandemic accelerated cashless payments. But can this growth continue as the pandemic recedes?
According to Visa chairman and CEO, Alfred Kelly, there is still scope for expansion.
“Let me start with number one, the enormous opportunity in consumer payments. We see that the pandemic has helped to further digitise cash,” Kelly said during an October earnings call.
“In the last 12 months, global debit cash volumes, which are primarily the amount of cash withdrawn from Visa debit cards, has increased 4%, while debit payments volume has grown 23%, both on a constant dollar basis,” Kelly concluded.
James Faucette, equity analyst at Morgan Stanley, is also optimistic about the long-term move towards cashless payments, rating Visa as one of the 30 for 2023 quality stocks for a long holding period.
“Visa is a key beneficiary of resilient consumer spending and consumers’/business’s ongoing migration from cash to electronic payments.” – James Faucette, equity analyst at Morgan Stanley.
Analysts at McKinsey are also optimistic that cashless payments are here to stay.
In last year’s Global Payments Report the company said it expected cash usage “to rebound to some extent… in 2021, due to a partial return to past behaviours, fewer lockdowns and a broader economic recovery”. However, analysts added that the evidence showed “roughly two-thirds of the decrease is permanent”.
Transaction costs
Visa’s business model means that it stands to make significant gains from growing cashless payments
“Margins are so strong because Visa also benefits from significant operating leverage. Once the payments network is set up, each additional transaction costs very little to process. The result is a capital light, highly cash generative business,” said William Ryder, equity analyst at Hargreaves Lansdown.
But this payment structure has proved a point of contention – in November, Amazon announced via customer emails that it would stop accepting Visa credit card payments in the UK from 19 January. However this dispute was resolved in January.
If this sets the stage for a US battle, it could represent a significant challenge for Visa, especially if Amazon tempts consumers towards its own Mastercard-issued Platinum Card.
Fintech partnerships
Visa could also be well placed to navigate fintech disruption in the payments market: Q4 2021 saw Swedish fintech company Klarna sign a global brand deal with Visa to accelerate expansion into new markets.
Equity analysts at Morgan Stanley are also optimistic that Visa’s market position leaves it resilient to fintech rivals.
According to the Morgan Stanley Vintage Values report on stocks to hold for the next year:
“The threat of disruption from new entrants is fairly low given Visa’s competitive cost structure and moat. Continued investment in longer term initiatives (faster payments, P2P, B2B) and partnerships continue to increase its TAM [total addressable market] and offer an opportunity for compounding double digit growth for the foreseeable future.”
Storm clouds on the horizon?
But Visa’s growth in the short term hinges on transaction volumes, and these could be hit as consumers feel the pinch from rising inflation and the spread of Omicron.
With US CPI inflation at almost 7%, will consumers delay spending as the cost of living soars?
Laura Hoy, equity analyst at Hargreaves Lansdown, argues that the impact on spending could prove uneven.
“We see retailers at the top and bottom ends of the spectrum as well-placed if inflation persists. At the top end, luxury retailers cater to high-net-worth customers, who tend to be less price-sensitive,” Hoy said in a note.
“Discount retailers, on the other hand, could see sales rise as people look for ways to stretch their pounds further. That leaves mid-tier retailers in a tough spot as their customers will feel the pinch,” Hoy added.
If this translates to lower transaction volumes, it could spell trouble for the Visa stock outlook.
Could Omicron pose risks?
The continuing covid epidemic also has the potential to affect Visa’s stock market performance. Although travel restrictions are easing, case rates remain high and may impact customers' spend by delaying spending and travel plans.
This could hit Visa’s lucrative international transaction revenues, which represented almost 30% of net revenues in Q4 2021.
Visa (V) stock forecast for 2022
On 23 March analysts rated Visa a consensus ‘buy’, with 20 ‘buy’ ratings, four ‘hold’ ratings, and zero sell ratings, according to data collected by MarketBeat.
The average Visa stock price target currently sits at $269.3 (23 March), an 23% upside on the current share price. The analyst price target consensus ranges from a low of $210 to a high of $290.
Analysts generally responded to Visa’s Q4 results release on 26 October by lowering price targets, but maintaining positive ratings: Citigroup, Royal Bank of Canada and Morgan Stanley all held a ‘buy’ rating on the stock, but dropped their price targets.
Despite this, analysts at JP Morgan upgraded the stock from a ‘positive’ to ‘overweight’ rating and boosted its Visa stock price target from $247 to $277, a 12% increase.
More recently, UBS initiated coverage on Visa, issuing a ‘buy’ rating and a price target of $275, a 36.48% upside on the 18 November report date. In late December, Wedbush lowered its price target on Visa stock from $270 to $240, though it maintained an ‘outperform’ rating.
Robert W Baird reiterated a ‘buy’ rating on the stock on 30 December, and issued a high price target of $305. On 11 January, analysts at Raymond James boosted the Visa price target (though marginally) from $263 to $265, and issued an ‘outperform’ rating.
Dan Dolev at Mizuho and Alexandre Faure both downgraded the stock to ‘neutral’ in January 2022 and lowered their price targets as the spread of Omicron fuelled concerns about consumption growth.
Note that analyst predictions can be wrong. Forecasts should not be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.
Visa stock forecast 2022-2027
On 23 March WalletInvestor’s algorithm-based service gave a bullish Visa stock price prediction for the year ahead, projecting that the share price may reach $241.83 by this time next year.
Using Visa historical stock price movements to predict future returns, WalletInvestor’s Visa share price forecast saw the price climbing to $342 by March 2027.
Note that algorithm-based predictions can be wrong, and past performance cannot guarantee future results. Forecasts shouldn’t be used as a substitute for your own research. Always engage in your own due diligence before investing, and never invest or trade money you can’t afford to lose.
FAQs
Is Visa stock a good investment?
On 23 March 2022, analysts rated Visa a consensus ‘buy’, with 20 ‘buy’ ratings, four ‘hold’ ratings, and zero sell ratings, according to views collected by MarketBeat.
Note that analysts’ predictions are often wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.
Why is Visa stock up?
The Visa share price has struggled through a volatile ride over the past twelve months, as the pandemic caused fluctuations in customer spending. The share price dipped over the summer as consumer spending momentum fell, but rallied towards the end of the year, thanks to stronger sales over the holiday season.
Will Visa stock go up?
According to MarketBeat, analysts’ price targets for Visa range from $210 to $290. The average analyst price target currently sits at $269.3.
Note that analysts’ predictions are often wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.
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