Visa’s (V) fiscal first-quarter results mirrored results from peer Mastercard in many respects, although on the whole it appears Visa is outperforming a bit at the moment. We see this as more a function of the company’s relative mix and near-term strategy, and any current differentials between the two don’t materially impact our long-term view. We will maintain our $194 fair value estimate and wide moat rating.
Net revenue decreased 6% year over year, a marked improvement from the high teens drop Visa had endured in the previous two quarters. Total transactions were up 4% year over year, a better level than reported by Mastercard, although that is likely driven in part by Visa’s heavier reliance on the U.S., which is performing relatively well right now. Dollar volume for the calendar year fourth quarter was up 5% year over year.
The main difficulty for Visa continues to be cross-border volumes, which carry an outsize level of importance for the networks due to the higher fees they collect on these transactions. Cross-border volume was down 21% year over year in the quarter, which does mark a material improvement from the previous quarter. However, excluding intra-Europe transactions, which are priced similarly to domestic transactions, volume was down 33%. While there does appear to be some mild recovery underway, we believe this headwind will remain in place for some time, and a meaningful bounce back will hinge on the distribution of vaccines globally. However, history does suggest that, while it will take time, travel will ultimately make a full recovery.
| Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days. |