One of the largest-cap stocks of the last decade, Visa Inc. (NYSE:in) with the labor a little later. The cost of visa stock still is almost 6% YTD, but over the past two months traded in visa was choppy.
And frankly, there are several reasons for caution. Rival MasterCard Inc (Ticker NYSE:mA) has a head start in Europe, where visa Visa integration in Europe, the unit was a bit hit-and-miss.
Visa, of course, is not cheap, trading at more than 23 2019 assessment of EPS. Meanwhile, shares of visa fell after the financial Q1 earnings in February, may, colors of hope in his financial report for 2nd quarter next week.
But I thought that the Visa stock looked attractive after that in February sales, and even with the V’s stock price 5% higher, I still believe that this is so. It’s true that the stock is not cheap, but it never is. And 65% operating profit and 50%+ market share, it should not be.
Q2 earnings should help the stock price
I’m still not entirely sure why Visa shares sold after the 1st quarter profit in early February. The weak broad market, of course help, but as I pointed out at that time, mA shares rose after earnings beat of its own on the same day.
But in Q1 as well as Guggenheim analyst noted, this month, is a trough visa revenue growth. The numbers have to do better in year out – since the second quarter. Tax reform will help earnings, but visa is still guided by the “mid-20-ies of the” net profit per share this year.
This is not a normalized indicator, due to the tax reform. But even with 9-10 points of EPS growth from taxes, and still 1-1.5 points from currency, visa earnings should grow 15% this year. What makes 28х a few EPS in 2018 is much more tolerable. And solid K2 should remind investors of how the impressive growth prospects of the visa are.
In a broader sense, it is not one quarter or one year history of growth. The payments space in General, there is a huge evaluations. And while visa should not be evaluated as the area of the ink (USA:kV) or via PayPal holdings Inc (Nasdaq:PYPL), he probably should trade at a premium to the overall market.
Visa is taking share from American Express company (Ticker NYSE:AXP). More and more transactions are carried out using cards instead of cash. E-Commerce will grow in the coming years. This is a classic case of “better to buy a wonderful company at a fair price than a fair company at a wonderful price”. And while V’s share price may seem steep, it still looks fair.
Shares of visa or MasterCard?
This time, according to MasterCard a week after getting the visa, and this is an interesting question whether in the presence or mA stock it is better to choose at the moment. For the most part, I don’t think that investors really can go wrong. I think that mA shares, is also worth buying, but at the moment I’m a little biased in favour of V.
In stock cheaper in the end. MasterCard best growth at the moment, but it’s still the number two network in the USA, mA shares actually exceeded there is a fairly handily in recent years. MasterCard stock is up 15% this year and 56% over the last twelve months. Figures for V the stock price is 6% and 36%, respectively.
So I agree with the Guggenheim, who claimed in the presence of best buy for the rest of 2018. EvercoreISI took the other side of the argument in March and made a solid case in the process.
Overall, though, this looks like an attractive sector, if the price is right. For some of the new processors, among them SQ and PYPL – I’m not sure what it is. For visa stock, however, I still see up. And I expect a report next week will remind investors why the stock is worth paying for.
At the time of this writing, Vince Martin has no positions in any securities.