Visa: 7% Dip Since Q3 Results As Post-COVID Potential Overlooked (Preview)

Company Update (V US) (Buy)

Summary

• Visa stock has fallen 7.3% since Q3 FY21 results on July 27 and has underperformed the S&P 500 by more than 13 ppt year-to-date.

• Visa's volume had surpassed pre-COVID 2019 levels by 21% by Q3, but revenues and net income were only 5.0% higher.

• The gap was due to travel restrictions hindering high-margin cross-border volumes; where people could travel, they did so enthusiastically.

• Visa stock is at a 40x P/E relative to both FY19 and FY21 EPS; EPS should rebound strongly in FY22 and grow at double digits thereafter.

• With shares at $232.65, we expect a total return of 53% (14.6% annualized) by September 2024, in just over 3 years. Buy.

Introduction

We review our investment case on Visa Inc. after shares have fallen 7.3% since Q3 FY21 results were released post-market on July 27.

We initiated our Buy rating on Visa (and Mastercard) in June 2019. Since then Visa shares have gained 44% (including dividends) in just over 2 years. Year-to-date, shares have gained 6.7%, behind the S&P 500's 2…