How to Buy Visa (V) Stock

Visa Inc. is the largest payment processing company in the world and operates in more than 200 countries and territories. Visa’s products and services can be used on any device, including cards, tablets, laptops and mobile devices.

As a financial services stock, Visa Inc. has seen steady growth both during the low-interest environment during the Obama years and over the last 2 years of business expansion under the current administration. 

The income of financial services stocks and bank stocks depends in large part on interest payments and transaction processing fees, which makes them particularly good investments in low interest-rate environments and during economic expansions. 

Quick Look: How to Buy Visa Stock

• Select a broker. It's important to find a broker that fits your style of trading, from buy-and-hold to active trading.
• Open a demo account. Test out your broker before putting your own money on the line.
• Fund your account and buy your stock. After you've become familiar with your broker, you can purchase Visa and add it to your portfolio.

Visa: Company and Stock History

Visa’s history began in 1958 when Bank of America introduced the first consumer credit card program in the United States. The company expanded internationally in 1974 and introduced the first debit card in 1975. In 2007, Visa merged its regional businesses from around the world to form Visa Inc. that was composed of Visa U.S.A., Visa Canada and Visa International. 

These were all merged into a new public company through an initial public offering (IPO) on March 18, 2008, which was then the largest IPO in history. Visa Europe also became a separate entity owned by member banks that also had a minority stake in Visa Inc., although it was eventually absorbed into Visa Inc. in 2016.  

The Visa Inc. IPO was for 406 million shares amounting to half of the newly formed company’s shares that sold for $44 per share to raise $17.9 billion. Visa stock is currently a component of the Dow Jones Industrial Average (DJIA) and the Standard and Poors (S&P) 100 and 500 indices.

Future Outlook for Visa

Visa’s stock has seen phenomenal growth since its IPO, rising to $248 per share by 2015, which is when the company announced it would split the stock at a 4 to 1 ratio. According to the Visa price chart below, the actual IPO price would be $11 per share, adjusted for that stock split. 

The market looks rather toppish with the potential for modest additional upside. However, the stock chart below does suggest a growing likelihood of a significant correction to the downside that could materialize in the medium term after the present uptrend loses momentum. If seen, the stock price could return to the $121.60 to $151.56 region.

The stock could very well present a long term buying opportunity on dips based on its strong fundamentals, which include strong financials, lofty position in the market and its 3.3 billion card users. Visa Inc. is now the 12th largest company in the world with a market capitalization of $369.9 billion and its stock trades at a price to earnings (P/E) ratio of 36.5.

Visa released its second quarter 2019 results on April 24, 2019, with net revenues of $5.5 billion, an 8% increase over the previous year’s $5.1 billion result in the second quarter. Net income for Q2 came to $3 billion versus $2.6 billion last year, up +14% year on year (YOY), while earnings per share (EPS) came in at $1.31 versus $1.11 last year, an increase of +17% YOY. Visa also returned $2.6 billion to shareholders in the form of dividends and share repurchases in the quarter. 

The company’s management also reaffirmed its guidance for the full year of 2019 and expected annual net revenue to grow in the low double digits on a nominal basis with a 1% negative foreign currency impact. Client incentives as a percentage of gross revenues, which are expenses used to generate revenue, were expected to be 22% to 23% for the year’s second half and the full fiscal year.

The table above shows the percentage change in the price of Visa stock over the last 10 years, which declined notably in 2010 in the aftermath of the global financial crisis, otherwise, it’s always generally risen. Due to the subsequent low interest rate environment seen after the crisis, the company then grew substantially and its stock was able to appreciate despite a less-than-robust economy until 2016.

After 2016, the Fed started raising benchmark interest rates, although the stock has shown resilience by continuing to gain in value due to higher revenues and earnings, despite the higher rates. 

V stock currently trades at the $170 level and is just under its all-time high price of $171.59 per share. It’s a good idea to exercise patience and wait until the stock offers a better price after a correction to buy it. Nevertheless, the company’s fundamentals continue to improve and the stock is still considered a strong buy, according to many top investment analysts.   

Why You Might Want to Buy It

• International opportunities: Visa’s services have considerable room to expand internationally as the world’s financial system becomes more interconnected. Visa already has a significant head start with its 3.3 billion card user base and existing scalable infrastructure for processing additional transactions from banks in emerging and third-world countries.  
• Continued capital appreciation: Visa stock has had only one year of negative growth in the last decade (2010) as can be seen in the table above. Not only has the stock price increased, it skyrocketed from its 2009 low price of $9.84 to its current level of $170 per share, showing a remarkable gain of +1,627.64% in 10 years. 
• Annual dividend: Visa only pays a $0.25 quarterly dividend, making the annual dividend yield on the stock just 0.825% with the stock price at current levels. While that yield doesn’t compare with the 2.0% yield available on a one-year Treasury note, the company could increase the dividend in the future, and it does give some investors added incentive to hold their stock long term. 

Considerations Before You Buy

• General economic and stock market downturn: As a financial services sector company, Visa stock has a beta of 0.99, which closely correlates with the performance of the major indices, such as the S&P 100, 500 and the DJIA. An economic downturn would most likely affect revenues, earnings and future growth, which would probably have a negative impact on the company’s stock price and the market in general.  
• Large data breach: Visa, like all companies that rely on information technology and deal with monetary transactions, could be the subject of a major data breach due to hacking, as other large companies have seen. For example, Yahoo was hacked twice in 2013-2014, compromising the personal information of as many as 3 billion users. Yahoo was once valued at $100 billion, but after the breach, it had to take $350 million off its sale price to Verizon. 
• Strong closest competitor: Mastercard (NYSE: MA) is Visa’s strongest competitor and currently lies ahead of Visa in growth rates and mix, although MA stock trades at a higher price of $259.87 per share. Mastercard also has a lower market cap and room to grow, which may lead to taking a larger market share from Visa in the future. 

How You Can Buy Visa Stock Right Now

Visa stock can be purchased through any reputable broker authorized to execute trades of stocks listed on the NYSE. Keep in mind that how you buy Visa stock is just as important as where you trade, so make sure you pick the right broker.

If you just want to buy some Visa stock as an investment to leave in a brokerage account for capital appreciation over the long term, you can open an account with a discount broker. You’d pay a lower commission but probably wouldn’t get access to the extra features you would get with a full-service broker. 

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Is Visa Stock for You?

Visa Inc. has been an excellent investment for many people over the past decade, and it continues to be one of the best stocks in its sector. Financial sector stocks make up a significant part of the S&P 500 Index and correlate strongly with the stock market and current economic conditions, which could be an issue for the stock if the U.S. economy heads south. 

Buying V stock makes sense if you hold a favorable outlook for the U.S. economy and the stock market, although a strong economic downturn or a significant data breach could weigh heavily on Visa’s stock price. Still, due to Visa’s large customer base and substantial international presence, the stock’s downside risk might be limited making it a buy on pullbacks. 

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