Barclays Sees Inflection Point In Visa Shares Heading Into 2017

Visa Inc V has been experiencing pressure on growth this year. Barclays’ Darrin D. Peller maintained an Overweight rating for the company, while raising the price target from $89 to $90.00. The analyst expects Visa’s organic top-line growth to accelerate in FY17 and FY18.

Since the beginning of 2016, Visa has experienced certain growth headwinds and these are likely to continue through the year, analyst Darrin Peller said.

Inflection In 2017

Visa’s EU segment would be closing shortly. Peller projected an increase in Visa's organic top-line growth to ~12-14 percent y/y in FY17 and FY18, from the FY16 reported growth rate of ~5 percent y/y.

The EPS estimate for 2017 has been raised from $3.32 to $3.40, to reflect “~$120mn of incremental annual revenue from an upcoming U.S. debit price increase and adjust our model for FX, incentive timing, and deals,” Peller wrote. He added that including the Visa Europe deal would take the EPS estimate closer to $3.60.

“Moving into 2017, we expect Visa's top- and bottom-line growth profiles to accelerate, and combined with V EU accretion rolling on, drive an inflection in shares,” the analyst added.

Peller enumerated the key variables as:

1. Gas, expected to boost EPS by ~1-2 cents
2. Forex, ~300bps top-line and ~400bps bottom-line headwind laps
3. Easing of cross-border volume growth comps
4. Pricing increases driving outsized growth
5. “Costco (~2-3c), USAA (~4c), and Fidelity (~1c) roll on; 4) incentive and rebate timing potentially makes for easier comparisons”
6. Easing of current forex volatility
7. Visa Europe expected to become accretive, assuming the deal closes by the end of F3Q