Is Visa Stock Fairly Priced At Current Levels?


Shares of Visa (NYSE: V) are up 7% YTD, compared to the 4% gain in the S&P 500 over the same period. Further, at its current price of $223 per share, it is trading 11% below its fair value of $250 – Trefis’ estimate for The valuation of Visa. The company beat consensus estimates in the fourth quarter of FY2022 (FY October-September), with net income (earnings minus customer incentives) growing 19% yoy to $7.8 billion. It was mainly driven by a 10% increase in payment volume, a 49% increase in cross-border volume (excluding intra-Europe) and a 12% increase in processed transactions. Overall, adjusted net income improved 10% yoy to $3.94 billion.

The company’s revenue grew 22% yoy to $29.3 billion in FY 2022. This was driven by a 50% increase in international transaction revenue, followed by a 16% growth in services revenue and an increase in of 13% in data processing revenues. In particular, international transaction revenue mainly benefited from the normality of international travel, compared to the previous two years, and an increase in consumer spending. In terms of costs, total operating expenses as a % of sales increased slightly in the year. Furthermore, total non-operating income decreased from $259 million to -$677 million. Overall, adjusted net income increased 21% yoy to $14.96 billion.

Looking ahead, we expect the growth rate to slow down in 2023 compared to the previous year. The strong growth in 2022 was mainly due to the easing of Covid-19-related restrictions and the improvement in consumer activity. General, Visa income are estimated at $31.9 billion in FY2023. In addition, Visas
the adjusted net profit margin is likely to increase from 51% to about 54% this year. It will likely result in adjusted net income of $17.4 billion and annual earnings per share of $8.28. This combined with a P/E multiple of just over 30x will lead to a valuation of $250.

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