The world’s largest payment processor saw its stock price plummet after it missed revenue estimates.
Stocks were tanking on Wednesday, particularly the Nasdaq, which fell some 540 points, or 3%, while the S&P 500 was down 100 points, or 1.8%. Disappointing earnings from some mega cap stocks, including Visa (NYSE:V), likely contributed to the selloff.
Visa had solid numbers in its fiscal third quarter, but it surely missed revenue estimates. The payment processor generated $8.9 billion in revenue, up 10% year-over-year, but it surely barely missed estimates of $8.92 billion.
Net income rose 17% to $4.9 billion, while earnings per share jumped 20% to $2.40 per share, which was in step with estimates.
So, the outcomes were somewhat mixed, but revenue misses are rare for Visa, which likely caused its stock price to fall some 3.7% on Wednesday to $255 per share. Yr-to-date, Visa stock is now down 2.3% for the 12 months.
It has been a difficult 12 months for Visa, but does this latest dip present a buying opportunity for investors?
A rare revenue miss
The last time Visa missed revenue estimates was in 2020, based on Bloomberg, so it’s a rare event, indeed.
Nonetheless, take note that Visa did grow revenue by 10%, just not as much as Wall Street analysts expected. The rationale it dissatisfied on the revenue front was that payment volume got here in lower than anticipated.
Payment volume, the quantity spent by Visa cardholders, increased 7% year-over-year, but that was a little bit below what analysts had anticipated. Further, payment volume was roughly much like Visa’s fiscal second quarter ended March 31.
“Within the U.S., while growth within the high spend consumer segment remained stable in comparison with prior quarters, we saw a slight moderation within the lower spend consumer segment,” Chris Suh, Visa CFO said on the Q3 earning call.
The decelerate within the “lower spend” consumer category, which suggests moderate-to-low-income individuals, is probably going attributable to the upper rates on bank cards, causing consumers to spend less.
Meanwhile, cross-border volume rose a hearty 14% year-over-year, while the variety of processed transactions increased by 10%.
Lower rates of interest should help
Visa didn’t change its revenue growth guidance for the total fiscal 12 months, keeping it at low double-digit growth with earnings per share growth expectations stays within the low teens.
It did, nonetheless, lower its expense growth range to high single-digits to low double-digits, from low double-digits within the previous quarter.
For its fiscal fourth quarter ended Sept. 30, Visa expects low double-digit revenue growth and the high end of low double-digit earnings growth — same as Q3.
If the federal Reserve lowers rates as anticipated, that would provide a lift in consumer spending and payment volume for Visa.
Do you have to buy the dip?
Several Wall Street analysts lowered their price targets for Visa, based on the expectation of continued slower growth. Yet, most maintained their buy rankings, with a median price goal of $310 per share, which could be a 21% increase over the present price.
Even the low end of the value goal range, $265 per share, would end in 4% growth from the present level.
We are inclined to agree, as today’s selloff had more to do with overvalued tech and large-cap stocks than Visa itself. No, the numbers weren’t great, but Visa has historically been one of the crucial consistent growers available on the market with its duopoly within the bank card space, low overhead, and high margins.
The proven fact that it is comparatively low cost immediately, with a P/E ratio of 28, down from 32 in March, and a forward P/E of 23, makes it a very good time to think about Visa. Today’s selloff presents a solid buying opportunity for investors.