Visa Earnings: A Stable Fiscal Year Finishes on a Good Note

Key Morningstar Metrics for Visa

• Fair Value Estimate: $272.00
• Morningstar Rating: 3 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of Visa’s Earnings

We think Visa V has settled into a comfortable groove this year as pandemic, political, and macro effects have dissipated. The firm’s fiscal fourth quarter was further evidence of stability in the business, in our view. In this environment, we think the company can consistently generate good growth and strong profitability. We maintain our $272 fair value estimate and see shares as about fairly valued.

Constant currency net revenue increased 12% year over year, a modest improvement from the previous quarter. Payment volume rose 8%, up slightly from last quarter but in line with results earlier this year. Transactions were up 10%, in line with recent results. Overall, the quarter suggests consumer spending is holding steady.

Cross-border volume has been one area with a bit of a tailwind recently, with higher-than-normal growth as travel recovered. However, we’ve seen ongoing signs that this has abated, and this quarter provided further confirmation. Constant-currency cross-border volume (excluding intra-Europe transactions, which are priced similarly to domestic transactions) grew 13% year over year, down slightly from 14% last quarter. We think cross-border volumes are fully normalized.

Excluding one-time items, operating margins (based on net revenue) were 66.1%, compared with 66.0% last year. Management had warned that expense growth would be relatively high this quarter, based on the timing of some expenses. We continue to expect solid margin expansion on a net revenue basis over time, given the scalability of the business. On the positive side, year-over-year client incentive growth was muted in the quarter, increasing only 6%, although that appears to be due to the timing of renewals.