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Visa Earnings: Growth Holds Up

Visa stock fairly valued as we maintain $241 fair value estimate.

Visa credit card
Securities In This Article
Visa Inc Class A

Visa Stock at a Glance

Visa Earnings Update

Visa V delivered solid growth and some margin improvement in its fiscal third quarter and largely maintained its recent trajectory.

We don’t see anything in the quarter that materially alters our long-term view and will maintain our $241 fair value estimate. We see shares as fairly valued at the moment.

Net revenue increased 13% year over year on a constant-currency basis, with a 9% increase in payments volume and a 10% increase in transactions. Overall, these growth metrics held roughly in line with what we’ve seen over the past couple of quarters, suggesting Visa is on a steady path.

Cross-border volume has been a major driver for Visa recently as travel spending has recovered from the pandemic-related decline, and cross-border volume remains critical due to the outsize fees Visa collects on these transactions. Constant-currency cross-border volume excluding intra-Europe transactions—which are priced similarly to domestic transactions—grew 22% year over year in the quarter, representing a 10-percentage-point decline from the growth rate last quarter. We expected growth to come down as volumes converge on the prepandemic trend and appreciate that growth remains strong in an absolute sense. However, if the economy trips into recession, this could put the cross-border recovery at risk.

Excluding one-time items, operating margins on a net revenue basis improved modestly to 67.5% from 66.9% last year. Visa had been seeing some modest pressure on margins recently as the company increased spending, but this quarter suggests that issue may be abating. However, client incentives increased to 28.1% of gross revenue from 26.1% last year. As the distortions from the pandemic recede, we expect client incentives to continue to increase over time, making margin improvement on a gross revenue basis more difficult to achieve.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Brett Horn

Senior Equity Analyst
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Brett Horn, CFA, is a senior equity analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers insurers and credit bureaus. He also oversees the equity research team’s stewardship rating methodology.

Before joining Morningstar in 2006, Horn worked in the banking industry for about a decade, most recently as a commercial loan officer for First Bank, where he was responsible for underwriting loans and managing relationships with middle market clients. Before that, Horn worked for Mizuho Corporate Bank, where he managed loan portfolios and client relationships, primarily with Fortune 500 companies.

Horn holds a bachelor’s degree in business administration, with a concentration in finance, from the University of Wisconsin and a master’s degree in business administration from the University of Illinois. He also holds the Chartered Financial Analyst® designation. He ranked first in the business and industrial services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

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