For the first quarter of the fiscal year 2021, which started on October 1, Visa Inc. (V), the largest public company in the payments sector, announced a 2.7 percent year-on-year drop in earnings per share to $1.42. Owing to the continuing effect of COVID-19 on cross-border activities, net profits dropped 4.5 percent year-on-year to $3.13 billion, due to a 6.1 percent year-on-year fall in net sales to $5.7 billion. The net profit margin was 55 percent, which reflects the resilience of the economic model of the company and the investment attractiveness of the shares.
Compared to the previous year, Visa demonstrated solid growth amid a small fall in financial indicators in annual terms. On the back of a 21 percent quarter-on-quarter rise in domestic commission sales (service revenue) to $3.03 billion, net revenue increased 11 percent quarter-on-quarter.
We score the financial results of Visa as good. A good rebound from the economic shock caused by the pandemic is shown by the firm.
The firm paid $0.70 billion in dividends in the first quarter of 2021 and completed a share repurchase of $1.80 billion. A new $8.0 billion equity repurchase scheme was approved by the Board of Directors. In the scheme, the overall number of available funds was $11.0 billion. Visa has carried out a quarterly buy-back of $1.92 billion over the last five years. The repurchase scheme is projected to run until the second quarter of 2022 and to have a positive effect on the price of the securities.
The gross income of Visa is 40.2% produced by Data Processing Revenues. They went up by 6% year-on-year, to $3.03 billion. Their gross cash volume rose by 1.8 percent year-on-year, to $3.11 trillion for the year, taking into account the rise in the amount of processed transactions. In a single economy, 35.5 percent of total revenue is generated by income (Service revenues). Here, the measure improved by 5% year-on-year, or $2.7 billion. Foreign transaction income accounts for 19.2% of Visa’s gross revenue, which declined by 28% year-on-year to $1.45 billion while it rose by 8% in QoQ. Other sales rose by 6 percent year-on-year to $0.38 billion (includes software, including the provision of analytical data for clients). Because of the turnaround in global economic activity, retro benefits (client incentives) rose by 9 percent, to $1.86 billion, which accounted for 24.6 percent of gross sales.
The specific target for the stock of Visa (V) on the year’s horizon is $290. In our view, the world’s largest payment firm holds strong growth opportunities, as the future demand for non-cash payments is valued at hundreds of trillions of dollars, and the pandemic factor is only growing the financial sector’s global digitalization. The group is focused on continuing to fund and grow its core market segments and will consider other candidates in the financial technology niche for future acquisitions after the cancellation of the acquisition of Plaid to build synergies and further expand the company.
“The price will not exceed $239 in the case of the “bearish” scenario, and it will increase to $316 in the case of the “bullish” scenario. Together with MA, V is one of the most promising businesses in the payment system industry in terms of opportunities, since the scope for payment growth will not be depleted for several years, even with growing pressure from FinTech. We assume that Visa shares are worth purchasing in the current situation. The bearish sentiment, in this case, has a margin of 20% which roses to about 59% in case of the bullish trend.