What happened
It was a good month for the payment powerhouse Visa (V +0.96%) as the stock price surged 16.6% in October, according to S&P Global Market Intelligence.
In comparison, the Dow Jones Industrial Average was up 14%, the S&P 500 was up 8%, and the Nasdaq Composite climbed 3.9% last month. Visa is currently trading at about $202 per share, down about 6% year to date as of Nov. 8.
So what
Visa's stock price shot higher after it posted excellent earnings for its fiscal fourth quarter and year-end on Oct. 25 that beat estimates.
For the fiscal fourth quarter ended Sept. 30, Visa posted revenue of $7.8 billion, up 19% from the previous year's fiscal fourth quarter. For the full fiscal year, Visa generated $29.3 billion in revenue, a 22% year-over-year increase.
Earnings were up 7% year over year in the quarter to $1.86 per share on $3.9 billion in net income, while earnings per share (EPS) was up 24% for the full year to $7 on $15 billion in net income.
NYSE: V
Key Data Points
As the country's largest payment processing network, Visa's revenue is going to be tied to consumer spending and that has been strong, despite high inflation. The gross domestic product rose 2.6% in the quarter and that was driven by higher consumer spending.
Visa's numbers were up across the board, led by a 36% increase in cross-border volume in the quarter, and 38% for the full year, as travel surged. Overall, payments volume was up 10% in the quarter and 15% for the full year, while the number of processed transactions jumped 12% in the quarter year over year and 17% for the full fiscal year.
"In Visa's fiscal fourth quarter, we saw a continuation of many of the spending trends present throughout 2022: strength in consumer payments, resilience in eCommerce and ongoing recovery in cross-border travel," Visa CEO Alfred Kelly said in a statement.
Now what
There are many macroeconomic uncertainties as inflation remains high and interest rates will keep rising for the foreseeable future. But Visa, as one of two major credit card networks, has had such a powerful advantage, and with its low overhead, efficient business model, and reliable revenue stream, it has been able to navigate all types of markets.
However, a bill currently in Congress, the Credit Card Competition Act, would require most banks to process electronic credit transactions on at least two affiliated networks, with at least one not being Visa or Mastercard. The idea is to increase competition and effectively lower costs for consumers.
Visa CFO Vasant Prabhu addressed the bill on the earnings call, saying the impact in 2023 will be minimal, if any.
"In terms of our views about the impact longer term, people come to us because of the value we create, and that value comes in the form of having a dual message network and everything that goes with it, the security and the reliability we offer that is unmatched, as well as the dispute resolution and other sets of services, tokenization, all our risk management services that we layer on. We've competed for business in the past, and merchants have chosen us based on the value we provide," Prabhu said.
It is definitely a development to monitor, but Visa remains a good long-term buy.
