Can Visa Join the $1 Trillion Market Cap Club?

Payment processing giant Visa (V 0.65%) has grown into a mega cap stock in just a little over a decade as a publicly traded company, with a market capitalization of about $420 billion as of this writing.

Since going public in 2008, Visa's stock price has increased by nearly 1,300% thanks to the gradual transition away from cash payments around the world, the surge in cross-border payment transactions, and smart expense management by the company. Another 140% gain would catapult Visa into the trillion-dollar club, and if the company's past performance is any indicator, such a move would certainly be possible.

With that in mind, here's a look at Visa's recent growth trends, how much room it could have to continue its growth trajectory, and whether it could join the $1 trillion market cap club anytime soon.

Image source: Getty Images.

Visa's growth has been impressive

There have been some impressive tailwinds that has fueled Visa's growth over the past few years. For one thing, e-commerce sales have been rising steadily from about 4% of all U.S. retail sales in 2010 to about 11.5% currently, according to the Census Bureau. Similar trends are occurring in Visa's other key markets around the world.

Not only that, but in-person payments have been rapidly shifting away from cash. Thanks to innovations by fintech companies like Square (SQ 5.04%), it has become easier than ever for merchants of all sizes to accept card and contactless payments. Cash has become less and less convenient to use relative to card payments.

Plus, cross-border payments have been a major driver of growth, and Visa has expanded its international footprint significantly.

These trends have translated into some impressive growth in recent years:

Data source: Visa. Note: 2018 net income and EPS growth included one-time benefits from the Tax Cuts and Jobs Act.

There are now nearly 3.5 billion Visa-branded payment cards in the world, about two-thirds of which are debit cards. But if you think Visa can't get much larger, think again.

The War on Cash is in the middle innings

The trend toward a cashless society has accelerated in recent years, especially in the United States. So, it would be unfair to say that we're still in the early stages of this trend.

However, it might surprise you to learn how often consumers still use cash, particularly in international markets. As much as 80% of payment transactions worldwide still take place in cash, and credit card acceptance in many markets around the world isn't nearly as universal as it is in the U.S.

In addition, there are many high-growth areas of the payments industry that could allow Visa to get much larger. Person-to-person (P2P) payments is one example, and the digital wallet industry is another. And keep in mind that Visa has barely tapped into its opportunity in many of the most populous markets around the world.

In all, Visa sees the worldwide payments space as a $185 trillion market. With roughly $9 trillion of annualized payment volume flowing through its network currently, it's certainly possible that Visa could double in size, or even more, within the next five years or so.

It's not an "if," but a "when"

To be clear, nobody has a crystal ball that tells the future of any stock, and there are certainly things that could prevent Visa from getting to $1 trillion in market cap in the not-too-distant future. For example, global economic growth could be slower than expected, regulatory issues could hinder its international expansion, or fee competition with other payment processors could eat into Visa's margins.

Having said that, given Visa's recent growth and the opportunity in front of it, Visa joining the trillion-dollar market cap club seems more like a "when" than an "if." After all, a 15% annualized growth rate will double a company's market cap in five years, and Visa doesn't need much more than a doubling to hit the trillion-dollar mark.