Visa: EPS Likely To Reach Turning Point And Grow 20% In Q3 (Preview)

Company Update (V US) (Buy)

Summary

• Visa stock lost 2.7% during May and underperformed the S&P 500, but we believe earnings are at a turning point.

• Revenues have grown above pre-COVID levels, thanks to volume growth, from the shift to electronic payments and strong U.S. retail sales.

• Cross-border volumes rebounded in April, having been steadily improving in preceding months, and should accelerate in the rest of 2021.

• Visa continues to make progress in Value-Added Services and new payment channels, guidance implies a 20% EPS growth next quarter.

• With Visa shares at $227.30, we expect a total return of 46% (12.0% annualized) by September 2024, in just over three years. Buy.

Introduction

We review our investment case on Visa after shares lost 2.7% during May, while the S&P 500 was up by 0.6%. (Visa's closest peer, Mastercard, lost 5.6% in May, though little has changed since our update early in the month.)

We initiated our Buy rating on Visa stock in June 2019. Since then shares have gained 41.1% (including dividends) in…