The payment processing giant Visa Inc. V has introduced a new product called Visa Tokenized Asset Platform (VTAP), which allows banks to issue and manage tokens backed by fiat currencies (like stablecoins) on blockchain networks. This new platform is part of the company’s broader strategy to integrate traditional finance with blockchain technology. Banco Bilbao Vizcaya Argentaria, SA BBVA, a major bank, is already working with Visa to test this solution and plans to launch live pilots on the public Ethereum blockchain in 2025.
Why is this important to Visa?
Essentially, Visa offers financial institutions a way to integrate real-world assets (like fiat currencies) onto blockchains, making transactions more programmable, secure, and interoperable. The move aims to connect traditional currencies and digital assets, potentially transforming the way banks handle payments and new types of digital transactions.
VTAP will likely help Visa capitalize on the growing demand for digital assets and programmable currency solutions. Leveraging its vast network of over 15,000 financial institutions and massive presence in over 200 countries and territories, Visa can introduce a new wave of blockchain-based products and services. This is expected to open up new sources of revenue and expand its influence in the financial sector.
By providing banks with an easy way to experiment with tokenized assets, Visa can strengthen its ties with traditional financial institutions while helping them adopt innovative digital solutions. The move strengthens its leading position in the fintech space, ensuring it remains competitive with other fintech and blockchain companies developing similar solutions.
V’s vision to support cross-chain interoperability and smart contract-based automation positions it well for broader adoption of real-world tokenized assets. This will likely open the door to use cases beyond payments. These initiatives strengthen Visa’s long-term growth prospects by enabling it to seize opportunities in the rapidly evolving blockchain and digital asset ecosystems.
But there is more to consider. It is crucial to evaluate Visa’s other growth drivers, fundamentals, and current market conditions before deciding on the stock’s investment potential.
What is the driving visa?
Visa is well-positioned to capitalize on growing volumes of cashless payments, driven by increased digital adoption despite pressures on lower-spending consumer segments. Its robust network, strong market presence and expanding partnerships support its ability to sustain growth, even as near-term fee revenue is impacted by reduced discretionary spending. Visa’s focus on cybersecurity and fraud prevention enhances its value proposition for both consumers and merchants, making it a preferred choice in the payments space.
Additionally, Visa’s consistent profitability, strong balance sheet and cash position enable it to deliver shareholder value through share repurchases and substantial dividends. Its total debt, at 34.2% of capital, is lower than the sector average of 41.8%. It generated net operating cash flow of $5.1 billion in the fiscal third quarter alone. In the most recently reported quarter, Visa returned $5.83 billion to shareholders and still had $18.9 billion remaining under its buyback program.
Efforts to strengthen its presence in developing economies in the Asia and South America regions are expected to further increase transaction volumes, contributing to positive long-term earnings projections.
Estimates for historic V & Surprise
The Zacks Consensus Estimate for current year adjusted earnings for V is currently pegged at $9.92 per share, indicating year-over-year growth of 13.1%. The consensus for next year suggests a further jump of 11.7%. The consensus estimate for fiscal 2024 and 2025 revenue suggests year-over-year growth of 9.6% and 9.8%, respectively. It has beaten earnings estimates in each of the last four quarters, with an average surprise of 2.9%. This is illustrated in the figure below.
Visa Inc. Surprise Price and EPS
Visa Inc. price-eps-surprise | Visa Inc. Quote
Visa Price Performance and Evaluation
Late last month, Visa shares fell following the filing of an antitrust complaint by the Department of Justice (DOJ), accusing it of illegally dominating the debit card market. However, the falling stock price has created a strong entry point for potential investors, according to several analysts. The price correction has strengthened Visa’s value appeal.
The company has seen its shares fall 0.6% over the past month, compared with the industry’s 1.1% growth and the S&P 500’s return of 3.9%.
V one-month price performance
Image source: Zacks Investment Research
From a valuation perspective, Visa currently looks expensive, with the stock trading at a 12-month forward price-to-earnings (P/E) of 27.87X, compared to the Zacks industry average of 21.63X . However, this premium valuation reflects the market’s strong confidence in the company’s future prospects.
Image source: Zacks Investment Research
In comparison, its counterpart, Mastercard Incorporated MA, is more expensive at 30.91X.
Visa Stock: Buy for Growth
Given the positive factors discussed, Visa is definitely a stock to add to your investment portfolio. The recent decline in its stock price has created an attractive entry point for investors. Currently, it is trading below the Zacks average price target of $308.24 per share.
Image source: Zacks Investment Research
With its expansion into blockchain technology and developing economies and the resulting diversification benefits, the company still has significant growth potential, which helps justify its higher valuation. As such, investors might consider sticking around and acquiring more shares, benefiting from its efforts to increase shareholder value.
Visa currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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