V - Embedded Expectations Analysis - 2020 08 17
Visa Inc. (V:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 35.4x Uniform P/E. At these levels, the market has bullish expectations for the firm, and although management's concerns about decline in volumes and demand and the potential of partnership deals suggest the potential for near-term headwinds, given the firm's positioning and growth opportunities, market expectations are too bearish. As such, longer-term outperformance remains warrantedSpecifically, management may be concerned about continued declines in international payments volume, and they may lack confidence in the sustainability of data products and consulting demand. Furthermore, they may be overstating the capabilities of their Conferma Pay partnership to enable virtual Visa commercial cards, and they may be concerned about the potential of their Instacart program and Octopus relationship. Additionally, they may be exaggerating the potential of their co-brand deal with Tiki in Vietnam, their ability to maintain big tech company relationships and P2P providers, and the capabilities of their Plaid acquisition in terms of its ability to integrate with fintechs. Finally, they may lack confidence in their ability to balance expense reduction and growth investment, capitalize on the accelerated secular shift to e-commerce, and moderate incentives growth
Despite management's concerns about volumes, demand, and partnerships, given the firm's oligopolistic positioning and digital solutions growth opportunities, market expectations are too bearish. As such, longer-term outperformance remains warranted for V
Visa is engaged in digital payments. The company facilitates payments between consumers and businesses. The company is focused on its proprietary network, VisaNet, to provide products and services. The company provides a portfolio of business payment solutions, including small business, corporate (travel) cards, purchasing cards, virtual cards/digital credentials, non-card cross-border business-to-business payment options and disbursement accounts, covering various main industry segments around the world. The company also provides several capabilities and services, including fraud prevention and security, processing, loyalty, merchant and digital solutions, consulting and data solutions.
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