Visa adds to gains as cross border travel recovery buoys shares

January 26, 2023 4:35 PM EST
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Price: $221.04 -0.7%

Rating Summary:
    36 Buy, 7 Hold, 1 Sell

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(Updated - January 27, 2023 12:45 PM EST)

Visa (NYSE: V) added to early gains mid-day Friday following its better-than-expected first-quarter results and relatively unchanged guidance after the close. Analysts were especially bullish on the strong cross-border trends, which benefited from the travel recovery. Shares last traded up 2.7%, putting the year-to-date gain near 11%.

The payment processor posted earnings per share of $2.18, beating the consensus estimate of $2.01 and up 21% from last year.

Revenue grew 12% year-over-year, or 15% on a constant-dollar basis, to $7.9 billion, compared to the consensus estimate of $7.7 billion, as the company saw stable payments volume and processed transaction growth and continued cross-border travel recovery.

Cross-border volume rose 22% in the quarter, or 31% excluding intra-Europe.

Total processed transactions were 52.5 billion, up 10% year-over-year.

Service revenues grew 10% year-over-year to $3.5 billion, and Data processing revenues grew 6% year-over-year to $3.8 billion. International transaction revenues grew 29% year-over-year to $2.8 billion. Other revenues were $587 million, up 31% year-over-year.

The company also returned $4 billion of capital to shareholders in the form of share repurchases and dividends.

Visa continues to expect about 15% revenue growth for the year, ex-Russia. In addition, the company didn't change its expectations for roughly mid-teens cross-border growth.

Following the results, Chairman and current CEO, Alfred Kelly, said, "I continue to see a bright future for Visa and believe that we have the right strategy to invest in and capitalize on the opportunities ahead across consumer payments, new flows and value added services."

On February 1, Ryan McInerney will become the new CEO of Visa and Kelly will assume the role of Executive Chairman.

Credit Suisse analyst Moshe Orenbuch raised the price target on Visa to $250 from $245 following the results, saying they continue to believe "Visa has very attractive qualities in the current environment." The analyst cited profitability, balanced exposure to discretionary versus non-discretionary and goods versus services, the ability to grow through moderate recessionary conditions, inflationary benefits, and mix shifts with cross-border evolving to become more eCommerce-focused and travel less-focused. The analyst maintained an Outperform rating on the stock.

Morgan Stanley's James Faucette raised his price target to $288 from $284, reiterating an Overweight rating. The analyst notes trends remain fairly stable with expense levers ready if
the environment were to worsen. "We see new flows and value-added-services providing support, with cross-border driving potential upside," the analyst added.

BofA Securities analyst Jason Kupferber highlighted that investor expectations were high going into the results following results from peer MasterCard (NYSE: MA). However, even with the high expectations they believe Visa's beat and continued acceleration in cross-border is enough to move shares higher.

By Davit Kirakosyan

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