Visa: Compounding Growth & Potential to Re-rate after Q3 FY24

Company Update (V US) (Buy): Shares have stagnated in the past 6 months even as EPS grows at low-teens, pushing P/E down to 27.5x

Highlights

• Shares are up 11.0% in the past year, but down 2% from Feb 8.

• EPS will grow at low-teens this year, having grown14% in Q1-3.

• Solid consumer growth is augmented by new flows and services.

• Volume growth has remained fairly stable in recent months.

• At $270.72, we see 88% upside (23.0% p.a.) by Sep-27. Buy.

Introduction

We review our Buy rating on Visa 6 months after our last published review on February 8. Visa shares fell by 4.0% the day after Q3 FY24 (April-June) results were released (post-market on July 23), but have since more than recovered, which means the share price is currently 11.0% higher than a year ago, but 1.8% down from February 8:

Visa Share Price (Last 1 Year)

Source: Google Finance (27-Aug-24).

Visa is a top-5 position in our “Select 15” model portfolio as well as a core holding for us in real life. Since we first initiated our Buy rating in June 2019, Visa shares have gained 71.0% in just over 5 years (including dividends).

We expect Visa to continue to compound, driven by years of double-digit EPS growth ahead and a potential re-rating.

(The rest of this article is for paid subscribers only, but unlocking it costs just $10; you can see a free sample of our research here; for a recap of the investment case, see our first Substack article on Visa in July 2023.)