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Visa’s (V) Strategic Alliances Impress; Forex Risks a Drag


On Sep 23, 2016 we issued an updated research report on Visa Inc. V.

The San Francisco-based company is one of the leaders in the international payment market. The gradual shift from paper-based payment toward electronic mode of payment has opened up significant business opportunities for Visa. Other internationally renowned electronic payment service providers like MarsterCard Inc. MA and American Express Company AXP have also been largely benefited by the shift in payment modes.

Visa is expected to gain a competitive edge over its peers with the acquisition of Visa Europe (in June this year). This transaction has opened vast business opportunities for the company. Visa now has direct access to the already advanced European payments market and has also achieved a greater scale and extent of diversity.

In addition, the agreement with PayPal Holdings PYPL on ending of rivalry in between is also expected to result in higher transactions through the Visa network. The recent agreement with Uber to enable customers with Visa credit card to enjoy discounted ride and avail benefits from other merchants associated with the former is another positive.

Visa remains focused on consistent technological updates. The launch of Visa Digital Commerce App, Visa Token Service, Visa Checkout and Visa Developer Platform have not only helped in digitization, but also facilitated in minimizing the risks of fraudulence. Visa has enhanced the security of card data by issuing chip cards with EMV technology. Introduction of “mVisa” application on mobile is expected to further streamline transactions.

The electronic payment network provider with its worldwide operations, posted positive earnings surprise in three of the last four quarters with an average beat of 1.87%. The Zacks Consensus Estimate for both 2016 and 2017 has been revised upward by 1.1% and 1.8%, respectively, over last 60 days.

Nevertheless, the company anticipates earnings growth to be limited over the coming quarters owing to the adverse impact of the stronger U.S. dollar on translation and cross-border volumes, continued low oil prices. Also, weakness in China and oil-based economies might affect overall growth. Apart from these, higher incentives, rebates and expenses are other headwinds.

Visa presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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