What 3 Visa Analysts Are Saying After Credit Card Network's Q3 Statement

Following Visa, Inc’s V third-quarter earnings beat Tuesday, analysts at Morgan Stanley, Credit Suisse and Raymond James provided their takeaways and outlooks on the stock.

Visa Q3 Earnings Recap

• EPS came in at $1.49, beating consensus estimates of $1.34 by 11%.
• Revenue came in at $6.13 billion, beating consensus estimates of $5.85 billion by 5%.
• Operating margins came in at 66.6%, beating consensus estimates of 64.1%.
• Fourth-quarter earnings are expected to be reported on Oct. 10.

Morgan Stanley's Visa Takeaways

Cross-border e-commerce growth might be an overlooked accelerating business segment for Visa, said analyst James Faucette in a Wednesday note.

Visa’s cross-border revenue grew 54% year-over-year, beating the analyst’s forecast of 44%.

Additionally, cross-border transactions have better transaction yields and are becoming easier to complete thanks to innovations in the fintech space, he said. 

Travel-related international spending remains 50% below 2019 levels, suppressing Visa’s share price, said Faucette.

Concerns around the Delta variant are only pushing pre-pandemic travel levels farther into the future, yet growing e-commerce spending has muted the international travel revenue losses, said the analyst.

Visa’s tech acquisitions have also addressed concerns that the company may become a dinosaur in the increasingly digitized payment industry, said Faucette.

The acquisitions ensure new talent is being brought into the company and that Visa is able to offer “a more complete suite of capabilities,” said the analyst.

Faucette raised his FY21 and FY22 revenue estimates by 3% to $24.01 billion and by 1.2% to $27.8 billion, respectively. The analyst revised FY21 and FY22 EPS estimates from $5.50 to $5.81 and $6.91 to $7.01.

Faucette maintained an Overweight rating on Visa and increased the price target from $279 to $282.

Credit Suisse's Visa Takeaways

Transactions processed are accelerating out of the third quarter into the fourth, said analyst Moshe Orenbuch in a Wednesday note.

Normalizing transaction sizes and the recovery of cross-border transactions should support Visa’s future gross and net yields, said Orenbuch.

Payment volume and processed transactions are up 21% and 20%, respectively, from 2019 levels, with a 5% and 4% improvement quarter-over-quarter, said the analyst.

Orenbuch revised his FY21 and FY22 EPS expectations from $5.81 to $5.84 and $7.43 to $7.42, respectively.

Longer-term, the analyst holds an Outperform rating on Visa with a $285 price target.

Raymond James' Visa Takeaways

Visa’s third-quarter results were very promising, with domestic trends continuing their favorable momentum and payment volumes surpassing pre-pandemic levels, said analyst John Davis in a Wednesday note.

Cross-border volume is “challenged” by continued border closings, though it is only a matter of time before that volume comes back, said Davis.

Management guided fourth-quarter growth in line with third-quarter results, implying the fourth quarter may see upside to consensus EPS estimates of $1.51, he said. 

Management also expects international travel and cross-border spending to be similar to the third quarter, implying that we may see even further upside should concerns around the Delta variant alleviate and borders reopen, said the analyst.

Davis reiterated the firm’s Outperform rating on Visa and increased the price target from $268 to $286.

V Price Action: Visa was down 1.9% to $246.15 at last check Wednesday.