Visa Earnings: Market Conditions Remain Favorable

Key Morningstar Metrics for Visa

• Fair Value Estimate: $289.00
• Morningstar Rating: ★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of Visa’s Earnings

Visa V had settled into a fairly steady path over recent quarters, as one-time impacts started to roll off and growth normalized. Taken on their own, the firm’s fiscal first-quarter report showed results holding up. We think the company continues to enjoy favorable long-term secular growth prospects, and a stable environment highlights the strength of the wide-moat company. We will maintain our fair value estimate of $289 per share, and see the stock as modestly overvalued.

Net revenue grew 10%, or 11% on a constant-currency basis, down slightly from the previous quarter. Payment volume grew by 9% constant currency and transactions were up 11%, both of which represented a slight improvement from the previous quarter. Management pointed to a strong holiday season as a driver. However, we saw Mastercard MA boost its growth at a faster rate in the quarter. We think Visa has done a good job of narrowing the growth differential with Mastercard over the past couple of years due to success in new channels. We hesitate to make too much of one quarter, but this could be ending.

Cross-border volumes have been a tailwind for Visa over the past couple of years, as the bounceback in travel from pandemic lows drove outsize growth. This tailwind had been fading, but this quarter bucked that trend. Constant-currency cross-border volume, excluding intra-Europe transactions—which are priced similarly to domestic transactions—grew by 16% year over year in the quarter, up from 13% in the last quarter. Mastercard saw a similar sequential improvement. We believe most of the benefits from the travel recovery have been realized, but this quarter suggests there could be further upside. Management pointed to the stronger US dollar as a tailwind, and maintaining this trend may depend on the dollar holding up.