Visa Inc (NYSE:V) is one of the biggest names in consumer finance and has a 50% market share of credit card issuance. The company has been a major stock market favorite as it has grown nearly 9 times in the past decade and has very bright future prospects as digital payments have emerged as the most promising sectors of finance. Visa is also famous to have caught Warren Buffett’s eye as he owns a stake in the company through Berkshire Hathaway.
The stock market came into this new decade with prospects of growth across most sectors, but little did anyone expect what this year had in store for the economy. The coronavirus pandemic has had an unprecedented effect on the economy as it had bought huge sectors such as travel, retail, food, and entertainment to literal or near literal shutdowns. The broad market indexes are currently down 12% YTD after going down as much as 31%. This market correction can provide excellent opportunities for investors with spare cash to buy up blue-chip companies at steep discounts.
One such opportunity is Visa Corp, the company is trading nearly 16% off its 2020 high. Visa reported EPS numbers of $1.39 per share and revenue of $5.85 billion, beating estimates of $5.72 billion. Revenue was up 7% YoY accompanied by an increase of just 4% in operating cost which resulted in an increased profit margin (Yahoo Finance).
The company reported a decline of 18% in US payment volumes and 45% decline in card-present(in-person payment) volumes. However, e-commerce and online payment volumes were up 18% for the quarter.
The company’s earnings was very informative and shed light on the state of consumer spending and new patterns in the same caused by the pandemic. The company reported a 30% dip in retail and automotive spending, a 50% dip in fuel, restaurant and entertainment spending and a staggering 80% dip in travel spending.
The company reported a 25% increase in digital wallet payments from last year in the US and a sharp 150% increase in contactless payments for the quarter (VISA Quarterly Report). Another unique advantage for the company is that it operates on a middle-man model, which insulates the company from any delinquencies arising from the economic downturn (Seeking Alpha).
Hence, Visa is an attractive stock available at a price that investors might not get in the future. The company’s stellar performance and management over the past few years is proof of it’s quality and it is positioned well for the boom in digital payments following the pandemic as the world has forcefully been shifted away from cash and in-person transactions.