V - Embedded Expectations Analysis - 2021 08 24
Visa Inc. (V:USA) currently trades near historical highs relative to UAFRS-based (Uniform) earnings, with a 34.8x Uniform P/E, implying bullish expectations for the firm. Although management's concerns about travel-related spending, the pace of the credit recovery, and services growth suggest the potential for near-term headwinds, market expectations are still too pessimistic. As such, longer-term outperformance remains warranted.Specifically, management may be concerned about the sustainability of cross-border volumes, the pace of international travel reopening, and the strength of accelerated cash digitization and e-commerce trends. In addition, they may lack confidence in their ability to sustain GAAP EPS growth, maintain value-added services revenue expansion, and make incremental growth investments post-pandemic. Furthermore, management may be concerned about the pace of credit recovery, a lower than expected top-line contribution from client incentives, and a potential impact of infection rates on mobility. Finally, they may be overstating the potential of their partnership with Goldman Sachs, the capacity for Visa Direct to handle high-volume customers, and the potential of their positioning in cryptocurrency wallets.
Although management may have concerns about travel-related spending, the pace of
the credit recovery, and services growth, market expectations are still too pessimistic given the firm's digital solutions growth opportunities and oligopolistic position. 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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