Payments technology juggernaut Visa Inc. V reported strong fourth-quarter fiscal 2024 results on Oct. 29, 2024. It showcased increased payments volume, processed transactions and cross-border volumes, benefiting from expanding global operations and solid demand for digital payments. Since then, the stock has jumped 8.5%, reflecting investor optimism.With this increase, the stock is now pretty close to its 52-week high of $309.

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Is this proximity to its 52-week high a signal to take profits, or should investors keep buying the stock for future gains? Before addressing this question, let's review the highlights of Visa's fourth-quarter fiscal 2024 results and their implications for the company's future.

3 Major Takeaways From Q4 Earnings

Earnings & Sales Beat: Visa’s EPS of $2.71 beat the Zacks Consensus Estimate by 5% and grew 16% year over year. Also, the top line of $9.6 billion beat the consensus mark by 1.2% and improved 12% from a year ago. Its payment volumes grew 8% year over year on a constant-dollar basis.

Transaction & Cross-border Volumes Rise: Visa’s processed transactions grew 10% year over year to 61.5 billion and beat our model estimate. On a constant-dollar basis, the cross-border volume climbed 13% year over year in the quarter under review. These double-digit growth rates show no turbulence in its business.

Visa Unfazed: Despite the concerns of spending being affected by factors like inflation, interest rates, and overall tightening macroeconomic backdrop, Visa’s numbers continue to grow. Since its earnings is based on payments volume and processed transactions, decreasing spending in high-ticket and discretionary items are not affecting its results much. It generates revenues even if people are spending less.

For a detailed analysis, read our blog: Visa Beats Q4 Earnings on Strong Payments Volume, Hikes Dividend.

Visa Relies on Network Strength

As more consumers and businesses use Visa for payment purposes, its overall network grows stronger and generates more revenue for the company. With more cash flow, Visa continues to invest in strengthening its network, marketing and promotions, keeping the long term in mind. This makes V’s business a sustaining one.

Global cashless payment volumes are bound to increase as economies push for further digitization. Visa, with its massive size (more than $560 billion market cap), market shareand extensive network, is well positioned to capitalize on that growing demand. Even if the company’s fee income takes a hit in the short run due to a slowdown in spending growth, its expanding partnerships and value-added services, strong networks and healthy margins will keep it resilient.

Visa Boosts Shareholder Value

Visa is a highly profitable company, and it keeps boosting shareholder value. It rewarded $6.8 billion to shareholders via share buybacks ($5.8 billion) and dividends ($1 billion) in the last reported quarter. It had leftover authorized funds of $13.1 billion under its repurchase program as of Sept. 30, 2024. On Oct. 29, 2024, the company announced a 13% raise in the quarterly cash dividends to 59 cents. Its dividend yield of 0.77% is higher than the industry average of 0.65%.

Visa Navigating Through Regulatory Hurdles

Its business may face some regulatory hurdles, which can affect its growth in the short run. Ongoing and potential legal battles, including some lawsuits, could lead to financial liabilities and increased competition. In September, the U.S. Justice Department filed a major antitrust lawsuit against the company. Investors utilized the resultant dip in stock price to gather more shares of the company.

The Credit Card Competition Act of 2023, which is designed to introduce more competition into the credit card network market and reduce costs for merchants, may affect V’s growth rate. Another major payment company, Mastercard Incorporated MA, is also the bill's target, where the congress intends to curb the duopoly these two companies are enjoying now (outside the Eastern Hemisphere, where UnionPay dominates).

V’s Diversification Efforts

Along with network strengthening moves, Visa’s revenue diversification efforts enable it to generate strong earnings in all economic conditions and mitigate risks. Also, since it does not hold debt risk associated with its credit cards, an increase in delinquencies will not likely affect its results.

Its cryptocurrency innovation efforts and digital wallet products will continue bringing more and more consumers and businesses into its network. Its investments in enriching cyber security and fraud prevention measures make it a safer choice for consumers and merchants. With rising cases of fraudulent activities, Visa’s services will attract more clients.

Favorable Estimates for Visa

The Zacks Consensus Estimate for Visa’s fiscal 2025 and fiscal 2026 EPS implies an 11.2% and 13.1% uptick, respectively, on a year-over-year basis. Similarly, the consensus mark for fiscal 2025 and fiscal 2026 revenues suggests a 9.6% and 9.9% increase, respectively.

Visa expects its full-year fiscal 2025 revenues to grow in high single-digit to low double-digit and earnings to grow at high end of low double-digit. The company beat earnings estimates in each of the past four quarters with an average of more than 3%. This is depicted in the figure below.

V’s YTD Price Performance & Valuation

Visa stock has grown 17.5% in the year-to-date period, underperforming the industry’s gain of 20.2% and the S&P 500 Index’s rally of 24.8%. In comparison, its peers like Mastercard and American Express Company AXP have gained 21.5% and 53.1%, respectively, during this time.

YTD Price Performance Comparison

Image Source: Zacks Investment Research

From a valuation perspective, Visa is trading a bit higher than the industry, indicating investor confidence. Going by its price/earnings ratio, the company is trading at a forward earnings multiple of 26.97X, higher than the industry average of 25.05X. 

Image Source: Zacks Investment Research

Meanwhile, Mastercard and American Express are currently trading at 31.87X and 19.34X, respectively.

Final Thoughts: Buy Visa Now

Considering the positive factors discussed, Visa is certainly a stock to keep in your long-term investment portfolio. Currently, it trades below the Wall Street average price target of $322.65 per share, indicating a 4.96% upside from current levels.

Image Source: Zacks Investment Research

V is trading above its 50-day and 200-day moving average, signifying a bullish trend.

Visa’s strong market position, extensive network, stability, and promising growth prospects set the stage for robust future expansion. The company’s high profitability featuresand favorable estimates suggest a promising outlook. These factors make Visa a compelling buy, even at current price levels, for investors looking for a solid investment in the growing payments sector.

Visa currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) tocks here.

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