Double-Digit Growth Not Going Away Any Time Soon

Visa stock (NYSE:V) appears positioned to sustain double-digit growth for years to return. The payments network giant experienced a modest revenue slowdown last 12 months, causing some investors to consider that its growth would fall into the one digits. Nonetheless, Visa’s most up-to-date results got here in strong, indicating that double-digit growth is once set to prevail. Wall Street, in actual fact, forecasts that this trend will stay in place for years to return, bolstering Visa’s bullish case. Subsequently, I’m bullish on V stock.

Q2 Results: Visa Sets the Stage for One other Great 12 months

Visa’s Fiscal Q2 results reignited investor confidence within the stock. The corporate’s growth remained within the double digits, a trend that appears set to be sustained moving forward despite earlier signs of a possible slowdown. Particularly, with Visa’s top line trending down consistently in earlier quarters, many investors were expecting that Visa’s full-year revenue growth would fall below the double digits. Taking a look at each quarter’s revenue growth between Q4 of 2020 and Q1 of 2024, you’d actually get that impression.

  • Q4-2020: 28.6%

  • Q1:2021: 24.1%

  • Q2-2021: 25.5%

  • Q3-2021: 18.7%

  • Q4-2021: 18.7%

  • Q1-2022: 12.4%

  • Q2-2023: 11.1%

  • Q3-2023: 11.7%

  • Q4-2023:  10.5%

  • Q1-2024: 8.8%

Fortunately, Visa’s Q2-2024 results reversed this slowdown. Its growth bounced sequentially, reaching 9.9%, while the continuing momentum points toward further gains within the second half of the fiscal 12 months. To elaborate on this quarter’s results, Visa’s revenue growth was driven by certain key aspects. These mainly included robust payment volume, a rise in processed transactions, and a notable rise in cross-border volume.

Regarding payments volume, Visa recorded an 8% increase year-over-year on a world scale, which was consistent with Q1 growth. Processed transactions also saw an 11% year-over-year increase, highlighting the regular increase within the variety of transactions Visa’s network handled​​. Lastly, cross-border volume, excluding intra-Europe, grew by 16% year-over-year in constant currency, reflecting a thriving tourism and travel industry overall.

These increases, in turn, drove Service revenue up 7% year-over-year, which was closely aligned with the 8% growth in constant-dollar payments volume from Q1. The rise in processed volumes also boosted Data Processing revenue by 12%. Finally, cross-border transaction growth drove International Transaction revenue growth of 9%, although this was somewhat offset by softer currency volatility in comparison with last 12 months.

Given its current momentum, management now expects revenue growth within the low double digits for the second half of the 12 months, thus propelling Visa’s full-year revenue growth into the double digits as well. On the one hand, total payment volume growth is now projected to are available in within the high single digits as an alternative of the previously forecasted low double digits.

This reflects certain trends in Asia, which have been slower than anticipated. Then again, cross-border volume, ex-intra-Europe, is projected to proceed growing robustly within the mid-teens, with e-commerce strength offsetting the weaker travel-related cross-border volume in Asia.

Subsequently, Wall Street expects Visa’s full-year revenue to grow by 10% to $39.5 billion. Importantly, consensus estimates point toward sustained double-digit top-line growth no less than through Fiscal 2026, evaporating earlier concerns regarding a possible slowdown in the one digits.

Growth, Valuation, Support Bullish Case

Considering Visa’s ongoing growth trajectory and favorable estimates, coupled with its current valuation, I’m confident within the strength of its bullish outlook. Essentially, Visa’s high-margin, scalable business model enables margin expansion over time, amplifying net income growth beyond revenue growth. Mixed with the corporate’s periodic stock buybacks, Wall Street anticipates a compound annual growth rate (CAGR) of 13.2% in earnings per share (EPS) over the following five years. To me, this means that the stock’s forward P/E of 25.5x is kind of attractive, particularly given Visa’s moat and overall qualities.

Is Visa Stock a Buy, In keeping with Analysts?

Regarding Wall Street’s view on the stock, Visa has a Strong Buy consensus rating based on 19 Buys and three Holds assigned previously three months. At $316.63, the average Visa stock price goal implies 18% upside potential.

If you happen to’re unsure which analyst you must follow if you ought to buy and sell V stock, essentially the most profitable analyst covering the stock (on a one-year timeframe) is Sanjay Sakhran from KBW, with a median return of 19.22% per rating and an 89% success rate. Click on the image below to learn more.

The Takeaway

Visa’s robust performance and promising growth outlook stress its potential to keep up double-digit revenue growth within the years ahead. The corporate’s strong Q2 results, driven by increased payment volumes, processed transactions, and cross-border activity, have reinforced investor confidence within the stock. With Wall Street’s forecast further supporting this theme and Visa’s valuation looking quite attractive against its future estimates, its bullish case seems as strong as ever.

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