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Global payment leader Visa: the most stable growth stock?
$Visa(V.US)$ Recently released performance for 2024 and Q1 2025 showed better-than-expected growth, driving the stock price to continue rising, reaching a new high of $351. As a global leader in payments, its business covers over 200 countries and regions, possessing a strong market position and growth momentum, with a stock price increase of over 2173% since its IPO, making it 7 times that of the same period.$S&P 500 Index(.SPX.US)$It has always been considered a stable investment choice and is included in the holdings of investment guru Warren Buffett.
So, is it still a good time to buy now? $Visa(V.US)$ Let's study this week's lesson together.
I. Global Payment Leader
Core Business
Visa mainly collaborates with banks and Financial Institutions to provide payment networks and technical support. Its profit model is very simple; just like highway tolls, any transaction processed through Visa can charge a service fee, which sounds like a highly profitable business!
From the revenue structure of the Earnings Reports in 2024, Visa's income mainly consists of four parts: service revenue, data processing revenue, international transaction revenue, and other income.
Data Processing Revenue: Accounts for 36%; covers the full process of transactions, such as authorization, clearing and settlement, value-added services, etc., similar to a highway toll station + maintenance fees.
International Transaction Revenue: Accounts for 26%; income related to cross-border transactions, such as fees collected by Visa when we spend overseas + profit from exchange rate differences.
Other Revenue: Accounts for 6%; can be understood as Visa's sideline, earning extra income through brand influence and additional services.
The major portion comes from Service Revenue and Data Processing Business, accounting for nearly 70% of total revenue. Combining the company's growth strategy in consumer payments and value-added services, Visa's series of technological innovations, such as the introduction of Visa Flexible Credential, Tap to Phone payment method, and Visa Payment Passkey program, all focus on enhancing user payment experience and efficiency, thereby driving the growth of core business. It can be seen that Visa's business model and development approach are very clear and reliable.
Performance Highlights
Looking back at Visa's performance over the past 5 years, it is evident that Visa excels in profitability, financial stability, and growth potential, making it a model of quality company.
High income and high profit: In the past 5 years, revenue growth has exceeded 10% each year, with a gross margin of over 80%, and net profit margin has almost maintained above 50%. Visa has managed to maintain stable growth while keeping high profits, indicating that the company's operational model is sufficiently robust.
Strong cash flow: Visa has a robust free cash flow, with free cash flow being approximately 50%+ of net income in recent years, indicating that the company has sufficient cash for distributing dividends and stock buybacks, continuously returning value to investors.
Balance sheet: Light asset model with low debt ratio. As a payment technology company, Visa does not require a large amount of physical assets and retail storefronts, resulting in a low proportion of fixed assets, which allows for sustained high efficiency and high gross margin, a key factor in Visa's continuous growth.
2. Investment Opportunities
After understanding Visa's earning capability, it's essential to comprehensively grasp the development opportunities of the payment industry and compare with peers to assess whether Visa's valuation is reasonable and still worthy of attention.
The industry has growth potential.
Cashless trend: According to McKinsey Statistics, from 2023 to 2028, global cash payments are expected to decrease from 18% to 10%. In emerging markets such as Southeast Asia and Africa, the increasing penetration of bank cards will become a new growth point for the payment industry, indicating that Visa's business still has room for growth.
Demand for cross-border payments: The recovery of international travel is expected to boost cross-border transaction volume by 15% year-on-year in 2024, directly benefiting Visa's business growth.
Digitalization of B2B payments: The need for automation in business payments amounts to approximately 200 trillion dollars annually, which can provide new traffic business.
Federal Reserve rate cut stimulus: A rate cut by the Federal Reserve may stimulate credit consumption, benefiting company revenue growth.
Significant Competitive Advantage.
Deep economic moat: Visa has a market share of approximately 50%+ in the credit/debit card network, dominating the North American and Asia-Pacific regions, while its largest competitor MasterCard holds a share of 25%. This illustrates that Visa's payment network has a broader coverage and stronger stickiness with merchants and banks.
High brand value: Visa is the most recognized payment brand globally, covering over 200 countries and regions, and its brand recognition and credibility greatly promote the establishment of the payment ecosystem.
Relatively reasonable valuation.
Valuation rollback: Visa's current PE is 35.03, and its PS is 18.45, with an annual compound growth rate between 8-10%. The current valuation level is significantly lower than the peaks in 2020 and 2021, which were primarily driven by the pandemic and a surge in tech stocks that inflated company valuations. Over the past two years, it has reverted to a more reasonable range.
Comparing with peers: Comparing $MasterCard(MA.US)$ , both companies have similar PS ratios, but Visa's PE is relatively lower. Considering the profit margin performance, Visa's valuation advantage is more evident.
Company. | Profit Indicators | 2024 | 2023 | 2022 | 2021 |
Visa | Gross Margin | 80.40% | 79.89% | 80.44% | 79.38% |
operating margin | 66.96% | 67.15% | 67.15% | 65.58% | |
Net margin | 54.95% | 52.90% | 51.03% | 51.07% | |
MasterCard | Gross Margin | -- -- | 76.01% | 76.33% | 76.23% |
operating margin | 57.73% | 58.29% | 57.21% | 54.16% | |
Net margin | 45.71% | 44.61% | 44.66% | 46% | |
Data source: Futubull. | |||||
In summary, Visa is an industry leader with a strong competitive advantage, consistently maintaining high profit margins and growth rates over the years. For investors who have a relatively low risk appetite and wish to steadily benefit from global consumer growth, Visa would be a good investment choice. How to determine the timing of Visa's trades specifically? Technical analysis can be used for this judgment.
III. Technical Analysis
From the multi-timeframe Candlestick charts (monthly/weekly/daily), Visa is in a strong upward trend. Although the KDJ indicator has recently shown a high-level death cross, suggesting a potential slight pullback, it does not change the long-term upward trend. Referring to MasterCard's 12 and 50-day moving averages, a retracement to E MasterCard's 50 could be a good time to establish or add to positions, which could be seen as a short-term support level, with the current reference price around $321.
IV. Risk Warning
Although Visa is a relatively stable investment choice, attention should be paid to the corresponding investment risks, such as those arising from regulation, competition, and macroeconomic influences, and a take-profit and stop-loss strategy should be prepared.
Regulatory pressure: Antitrust investigations, fee caps (such as the EU's Interchange Fee Regulation).
Technological disruption: If Cryptos payment or decentralized finance is adopted widely, it will impact traditional card organization payment networks.
Competitive threats: Pressure from PayPal, Alipay/WeChat Pay (expansion outside China), real-time payment systems (such as India's UPI).
Macroeconomics: Economic recession leads to a contraction in consumer credit.
Risk Disclosure: This content does not constitute a research report, is for reference only, and should not be used as the basis for any investment decision. The information contained herein is not a comprehensive description of the securities, markets, or developments mentioned. Although the sources of information are considered reliable, the accuracy or completeness of the above content is not guaranteed. Furthermore, there is no guarantee regarding the accuracy of any statements, viewpoints, or forecasts provided in this article.
