Thursday was a banner day to be a Tesla shareholder. Buoyed by a rare and unexpected quarterly profit, Tesla stock zoomed to close almost 18% higher.
Since it's such a famous and high-profile company, Tesla's Thursday triumph obscures the encouraging gains posted by other top stocks on the day. Take payment card giant Visa (V -0.59%) and veteran software maker Adobe Systems (ADBE -1.73%), for example. Are their Thursday gains justified?
Image source: Visa.
Visa
It's a fine time to be in the payment card business. Earlier this decade, for the first time in modern financial history, the volume of payments made with cash was eclipsed by those made with other means -- such as credit and debit cards. That, combined with a generally humming global economy, is providing plenty of fuel for growth.
If cards (and other noncash means of transacting) are on the march, you can be darn sure Visa is leading the parade. The company is the most popular card brand in the world by a large margin in terms of both cards outstanding and payment volume, and has been active in the digital payments space for years.
In the latest of what has been a series of very profitable quarters, Visa released its Q4 of fiscal 2019 results on Thursday.
Net revenue rose by 13% on a year-over-year basis (to $6.1 billion) on the back of total payment volume that advanced by almost 9%. Non-GAAP (adjusted) net profit increased by 6% to just over $3 billion, resulting a beefy net margin of 54%.
While revenue was more or less in line with analyst expectations, the bottom-line figure comfortably exceeded estimates -- hence the bump in share price.
Even if the global economy starts to sputter, that cash-to-alternate means of payment trend is a long-tail one that should last for a while. It's going to benefit the broader payment industry, and King of Plastic Visa will be one of the top beneficiaries. I think today's nearly 3% rise in Visa stock is fully justified, and the stock will see more gains.
Adobe Systems
Adobe stock saw a 3%-plus lift on Thursday. There wasn't any obvious catalyst for this pop, save for perhaps the company's CEO, Shantanu Narayen, being named to Harvard Business Review's latest list of top 100 CEOs on planet Earth.
Narayen, who has been on his throne since 2007, certainly deserves his share of the credit for the company's numerous successes over the years. Adobe is a banner example of a onetime traditional package software maker that pivoted smartly to its present cloud-based-subscription model.
Investors like recurring revenue because it makes future results more predictable. Adobe under Narayen has also done a good job keeping its suite of products current, relevant, and at or near the top of the industry standards list.
Quick, what program do you use to open PDF files? Chances are, the answer is Adobe Reader, one of many programs/apps the company provides for free to snare users into paying for premium products.
All of the above have helped goose revenue -- which more than doubled from 2014 to 2018 -- and keep profits rising sharply, at high margins.
I don't think this train is going to slow down anytime soon. Like Visa with the migration to noncash means of payment, software users continue to embrace the cloud-based subscription model. I think Adobe has plenty of growth still in front of it, and investors should consider buying the stock at present levels.
