Visa: Unjustified 7% Correction After Strong Q4 FY21 Results

(Preview) Company Update (V US) (Buy)

Summary

• Visa shares fell 6.9% on Wednesday after strong FY21 results and a positive FY22 outlook, and is now slightly down year-to-date.

• Volume has continued to recover in Q4 FY21, and high-margin Cross-Border Volume (ex-intra-Eurpoe) accelerated to 86% of 2019 level.

• Q4 FY21 revenues reached 7% above 2019 levels and, with operational leverage and buybacks, EPS reached 10% above its 2019 level.

• Management comments on FY22 indicate a mid-teens EPS growth. Client incentives are rising, as they have done harmlessly in the past.

• With shares at $215.78, we expect a total return of 91% (18.2% annualized) by September 2025, in just over 4 years. Buy.

Introduction

We review our Visa Inc. investment case after shares fell 6.9% on Wednesday (October 27) following the release of Q4 FY21 results overnight. Visa's closest peer, Mastercard, saw its shares fall 6.0%.

We initiated our Buy rating on Visa (and Mastercard) in June 2019. Since then Visa shares have gained 33% (including dividends) in just over 2…