V - Embedded Expectations Analysis - 2021 02 19
Visa Inc. (V:USA) currently trades near historical highs relative to UAFRS-based (Uniform) earnings, with a 37.3x Uniform P/E, implying somewhat bullish expectations for the firm. Although management's concerns about Visa Direct growth, regional economic recoveries, and cross-border volumes suggest the potential for near-term headwinds, market expectations are still too bearish. As such, longer-term outperformance remains warrantedSpecifically, management may lack confidence in their ability to sustain growth in Visa Direct transactions, contactless card availability, and real-time cross-border transfers. Furthermore, they may have concerns about the pace of the COVID-19 recovery in the CEMEA and Latin America regions, the usefulness of cryptocurrencies, and declines in card-present spending levels at restaurants. Moreover, management may lack confidence in their ability to grow their payments network, enable all forms of payment, and mitigate cross-border volume declines. Finally, they may be exaggerating the potential of fiat-backed digital currencies, and may lack confidence in their ability to manage operating costs and gain credit and debit market share in India
Despite management's concerns about Visa Direct growth, regional economic recoveries, and cross-border transaction volumes, market expectations are still too bearish given the firm's digital solutions growth opportunities. As such, longer-term outperformance remains warranted
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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