The Positives (And Negatives) Of Investing In Visa

In a report published Friday, Wedbush analysts maintained a Neutral rating on Visa Inc V, with a price target of $65, after the company's quarterly results beat expectations, despite headwinds. Visa reported F2Q revenue at $3.4 billion, up 10 percent y/y constant currency and EPS at $0.63, both of which were ahead of expectations. Currency headwinds had a (2)ppt impact on revenue growth. In the report Wedbush noted, "FQ2 metrics remain strong in the face of headwinds. Payment volume grew 11% YoY constant currency with credit volumes growing 13% and Debit growing 8%, both constant currency. Along with FX, volumes were negatively impacted by lower gas prices, which provided a 2ppt headwind to credit and 3ppt headwind to debit." The analysts expect the Costco Wholesale Corporation COST deal to result in higher volumes, albeit "with lower economics." Moreover, the analysts said that if the Chinese government opens its market for competition "it is likely in order to lay the groundwork for China Union Pay (which is likely going public over next year or two) to compete more aggressively in every other market Visa competes in." Visa reduced its guidance to low-end of mid-teens growth range. The EPS estimate for FY15 has been reduced from $2.60 to $2.58 to reflect the lowered guidance.