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Stock Analyst Update

Visa Earnings Show Continued Strong Growth; Stock Slightly Undervalued

Favorable long-term trends, rise in travel-related spending put Visa in good position.

Visa credit card

Visa continued to enjoy strong growth in its fiscal fourth quarter. Overall, while the company’s near-term future is somewhat tied to the direction of the economy, we think favorable long-term secular trends and an ongoing bounce back in travel-related spending put the wide-moat company in a relatively strong position. We will maintain our $229 fair value estimate and see Visa’s stock as modestly undervalued.

Net revenue increased 19% year over year, or 23% on a constant currency basis. Purchase volumes in the quarter were up 10% on a constant currency basis. This does represent a slight deceleration from the last quarter, but we consider this to be a solid result, especially considering the drag from the decision to exit Russia.

Cross-border transactions have been a major driver of the business over the past couple of years, given the pandemic impact on travel and the relatively large fees Visa collects on cross-border transactions. This has been a significant positive for Visa in recent quarters as travel-related volumes have recovered. Constant currency cross-border volume excluding intra-Europe transactions (which are priced similarly to domestic transactions) grew 49% year over year in the quarter, basically maintaining the pace of growth Visa has seen the last few quarters. We continue to expect a full recovery in travel spending over time, and comparing current travel-related volumes to the 2019 level suggests there are still benefits for Visa ahead.

Brett Horn does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.