Forget the new bull market being indicated by new stock all-time highs powered by big tech. Digital payments leader Visa (V -0.23%) just had yet another solid earnings report. After reporting a 9% increase in total payments volume in fiscal 2023 (for Visa, the 12-month period that ended in September 2023), it kicked off fiscal 2024 (its first quarter ended in December 2023) with another 8% year-over-year increase in payments volume. Not bad for a "recession-like" economy in the last year or so.
There remain some persistent calls for slowing economic growth, with some economists remaining stubborn in their call for a recession, in 2024. But Visa thinks all is well. It's predicting stable growth in its global payment volume that could lead to high-single-digit to low-teens percentage growth in revenue.
If you're looking for a quick and easy way to invest in the "new bull market," Visa stock could be your ticket in 2024.
The financial "network of networks"
Visa operates four of its own data centers and a dedicated global telecom network to process tens of billions of transactions every quarter (57.5 billion last quarter). Its core business is simple: It acts as a toll booth, taking a percentage cut of transactions that use its network. It also acts as the connective tissue between various banks and financial institutions, merchants, and purchasers, making it a type of sprawling communications enterprise (with the "communication" in this instance being details regarding a transaction and the parties involved in it).
However, as the world goes increasingly digital, Visa has been expanding its services to accommodate other financial networks too -- its "network of networks" strategy. Whether it's traditional card-based digital payments or newer cloud computing-based ones, Visa aims to facilitate them as a type of railway of global money movement. It has numerous add-on services like data security and analytics, business payment management solutions, and cloud-based integrations for upstart fintechs.
With such a sprawling enterprise based on a foundational capability like movement of money, Visa is thus a solid barometer of global economic health. As digital technology continues to expand the options available to move money and transact business around the world, Visa's revenue will be able to outpace average annual low-single-digit percentage economic growth -- much as it has since its debut as a publicly traded company in 2008.
Data by YCharts.
The real reason Visa stock is a buy
Of course, revenue growth is no reason to invest in a company. The amount of profit a company is able to capture is of far more importance. In this department, Visa excels. In first-quarter fiscal 2024, earnings per share increased 20% year over year (or up 11% on an adjusted basis).
Visa can accomplish this feat with that efficient global network of data centers, telecom infrastructure, and cloud-based solutions. Once built, these assets have the ability to facilitate a seemingly near-infinite amount of transaction volume, with each new increase in transactions adding very little in the way of new expenses for Visa.
Along the way, it doles out plenty of excess cash to shareholders with dividend increases and stock buybacks.
Data by YCharts.
Shares do trade for a premium (30 times trailing 12-month earnings, or about 25 times one-year forward expected earnings), as has been the persistent norm for the duration of its existence as a publicly traded stock. But Visa is a fantastically durable choice for business owners with long-term mindsets. As the next bull market gets rolling, this is a top stock to buy and hold for the decade ahead.
