Investors might have gotten jittery about bank stocks again on Tuesday, but that fear didn't permeate the entire financial sector. Helping to ease the market's nerves was Visa (V -1.70%), which published impressive results for the second quarter of fiscal 2023 (ended March 31) after trading hours that day.
During the quarter, the card payments giant managed to lift several key fundamentals at double-digit percentage rates. Let's take a peek at the key numbers, and gain some insight into the immediate future for the company.
Double-digit improvements
You can get a sense of the scale and reach of Visa in its headline numbers. Its revenue figure for the quarter hit a dizzying $8 billion for the first time in the company's history, marking an 11% year-over-year gain and edging past the $7.8 billion estimated by analysts on average.
Visa did even better on the bottom line, with a non-GAAP (adjusted, meaning not in accordance with generally accepted accounting principles) net income figure of $4.4 billion, bettering the year-ago quarter by 14%. That tally resulted in a per-share profit of $2.09; this was well ahead of the $1.99 average forecast by analysts.
Visa is what's known as an open-loop payments company, meaning that it chiefly acts as a processor of card transactions and the brand stamped on that plastic. The card issuer, almost always a bank or other financial institution, is the party that actually extends the credit and earns the interest charges when customers repay (and takes losses when they don't).
In that respect Visa's nearest comparable operator is eternal rival Mastercard. By contrast, closed-loop card companies act as both the processor and the issuer. The most handy example of this is American Express, which in contrast to Visa and Mastercard concentrates on a narrower demographic of relatively higher-end consumers.
Winning the volume game
As an open looper garnering a tiny cut of every transaction, then, Visa's results heavily depend on volume.
Fortunately for the company, that metric is high because it has established itself as the No. 1 payment card brand by the number of cards in circulation, with roughly twice as many cards as distant runner-up Mastercard.
Growth continues to motor along, too, since we're in the midst of the long-tail decline in the use of cash around the world. For a consumer who wants to go cashless, there are few better options than a Visa card.
Total payments volume for Visa's second quarter tells the tale. It rose by 10% year over year, powered especially by cross-border transaction volume. The entirety of planet Earth is a marketplace these days thanks to technology; no wonder shoppers are eagerly buying stuff from foreign countries. Cross-border purchase volume rose by a sturdy 24%; this rises to 32% if you cut sluggish Europe out of the equation.
The world's payment pick
It looks like Visa will continue doing the double-digit dance into the immediate future. Collectively, analysts tracking the stock expect the company's per-share profit to rise in the mid-teen-percentage range for both full-year 2023 and 2024. That should be on the back of revenue set to advance at an 11% clip in each of those two periods.
Meanwhile, the company's forward price-to-earnings ratio stands at 27, which is high, although not outrageous given both solid historical performance and strong future potential.
So Visa, ultimately, still seems like a winning stock pick, especially now that worries about other segments of the finance sector -- yes that means regional banks -- are flaring up again. Barring a sudden and sharp economic decline, the world's shoppers are going to keep buying ever more goods and services with plastic. As the top card payment dog, Visa will continue to benefit very handsomely from this.
