Investors have been overly concerned about upcoming reductions to credit card interchange rates, at least according to one Wall Street analyst. TD Cowen's Bryan Bergin recently initiated coverage of Visa (V -1.13%) with a buy rating and a $320 price target.
A reasonable target for the market leader
Bergin's target implies a gain from the current price of about 16% over the next 12 months, and it is higher than most of his peers. Given the recent pace of growth we've seen from the world's largest global payment network, it's not an unreasonable stock price appreciation expectation.
A recent agreement to reduce U.S. credit card interchange fees for at least 5 years might sting. Luckily, international transactions are rising fast enough to overcome the headwind and continue delivering steady earnings growth at a high-single-digit percentage through 2030.
Visa reported cross-border volume that rose 16% year over year in the company's fiscal 2024 first quarter that ended Dec. 31, 2023. That helped push adjusted earnings 8% higher year over year. Share repurchases allowed fiscal first-quarter earnings per share to rise by 11% year over year.
A good stock to buy and hold
Visa has grown earnings per share by 298% over the past decade and international markets and cross-border transactions give Visa room to grow. The stock has been trading for just 27.8 times forward earnings expectations. This isn't an unreasonable price to pay for a stock likely to continue growing earnings by a high single-digit percentage over the long run.
As the largest of just four card-based global payment networks, investors can reasonably expect continued earnings growth from Visa for at least another decade.
