Visa Inc., an American multinational financial services company headquartered in Foster City, California, was founded on September 18, 1958. Visa Inc. is a payment technology company that connects consumers, merchants, financial institutions, businesses, strategic partners and government entities to electronic payments. The company operates through the global trade payment service segment through the transfer of value and information between participants. Transaction processing networks facilitate authorization, clearing and settlement of payment transactions and provide financial institutions and their clients with a variety of value-added products, platforms and services. Its service products include core products, processing infrastructure, transaction processing services, digital products, merchant products and risk products and payment security initiatives.
Nearly all Visa transactions worldwide are processed via VisaNet, which is operated directly by the company in one of four data centers that are secure from natural disasters, crime and terrorism; they operate independently of each other and from external utilities if needed.
In its Q3 earnings report, Visa reported GAAPnet income of $2.4 billion or $1.07 per share and non-GAAPnet income of $2.3 billion or $1.06 per share. This equates to $1.37 per share for the last year. They reported a net income of $4.8 billion, close to last year’s revenue of $5.84 billion, despite a 17% decline due to the continuing impact of COVID-19. There was $1.6 billion in capital returns to shareholders in the form of share repurchases and dividends. Alfred F. Kelly, Jr., Chairman and Chief Executive Officer, Visa Inc., said it will continue to focus on managing its mid- and long-term business despite the challenges of the global pandemic.
Visa shares opened in January 2020 at 189.00 and closed last week, ending 23 October 2020, at 198.01. This means that there was an increase of 4.8%. But earlier this week, prices continued to weaken amid concerns that rising coronavirus cases would weaken the global economy and because of the dim prospect of fiscal aid from Washington ahead of the presidential election. The USA30, USA500 and USA100 Indices fell earlier this week. The White House’s Larry Kudlow has said that President Donald Trump cannot accept part of the stimulus bill being put forward by Democrats. The Dollar strengthened and bonds rose, sending the 10-year yield lower. Investors are still focused on the prospect of a US stimulus deal, even though time is running out to finalize the aid package before the election.
The Visa Inc. share price at the start of the week fell close to the year high opening price of 189.00; at the time of writing the position price was at 191.24 before the Q4 earnings report, which is scheduled for tomorrow October 28, 2020. The increase in sentiment is likely to bring the price to a test of the support level near the 38.2% retracement level. However, if the support is strong enough, or investors refrain from profit taking, the price may still consolidate before the election. A break of the support level will test the 50.0% retracement level.
Clearly investors will be paying attention to another key metric to gauge how Visa has dealt with the impact of the coronavirus since the Q3 report, which is the growth of global payment volumes in constant currency. Measuring Visa’s growth in constant currency smoothing exchange rate fluctuations would give investors a clearer picture of this metric.
For Q4 2020, will the payment volume remain constant or will it decline sharply?
Investors should pay attention to the fact that industry prospects can also have a material impact on stock performance.
Quoting Zacks, Visa is expected to experience a decline y/y on lower earnings when it reports results for this quarter. Stocks will probably move higher, if the key numbers exceed expectations in the upcoming earnings report, but on the other hand, if it slips the stock price may move lower. The Zacks consensus expects global payment processors to post quarterly earnings of $1.09 per share in the report, representing a -25.9% y/y change. Revenue is estimated at $5.02 billion, down 18.2% from last year’s quarter. The consensus EPS estimate for the quarter has been revised 0.06% lower over the past 30 days to current levels.
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Ady Phangestu – Market Analyst – HF Educational Office – Indonesia
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