Business

Wall Street eyes Visa’s growth and resilience By Investing.com

Published

5 months ago

March 30, 2024

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In the fast-paced world of electronic payments, Visa Inc . (NYSE: NYSE:) stands out as a global leader connecting various entities with its advanced technology. Analysts from esteemed firms have recently provided a comprehensive analysis of Visa’s financial health, strategic direction, and market potential. As we delve into the details, it is clear that Visa is navigating the current economic landscape with a strategic eye on growth and shareholder value.

Company Overview

Visa has been a pioneer in the payments industry, enabling secure and swift transactions across the globe. The company’s expansive network connects consumers, businesses, governments, and financial institutions, facilitating a seamless flow of commerce. Visa has consistently demonstrated its ability to adapt and innovate, ensuring its competitive edge in a dynamic market.

Financial Performance and Strategy

Visa’s recent financial results have been robust, surpassing analysts’ expectations. The company reported strong fiscal quarter four earnings, with revenue and earnings per share (EPS) beating forecasts. This performance is a testament to Visa’s operational efficiency and its ability to capitalize on positive spending trends.

Looking ahead, Visa has set an ambitious course for fiscal year 2024, with management reinstating full-year guidance that forecasts double-digit adjusted net revenue growth and low-teens adjusted EPS growth. This guidance is slightly more optimistic than what the buyside anticipated, indicating confidence in the company’s strategic initiatives.

Growth Drivers and Capital Allocation

Analysts have highlighted Visa’s strategic shift towards non-traditional growth drivers, particularly within its Value Added Services (VAS) and new payment flows. The company’s focus on these areas is expected to diversify its revenue streams and enhance its growth prospects. Moreover, Visa has announced a generous $25 billion share repurchase program and a 15% increase in its dividend, underscoring a robust capital allocation strategy that rewards shareholders.

Competitive Position and Market Trends

Visa continues to strengthen its market position by expanding its core consumer payments business and making significant inroads in new services such as Visa Direct and Visa B2B Connect. The company’s cross-border travel volume has normalized at a higher baseline rate, suggesting consistent growth without the assumption of an economic downturn in its projections.

Regulatory and Economic Considerations

While Visa’s guidance for fiscal year 2024 is positive, it does not account for potential economic downturns or the impact of regulatory changes. This presents a risk factor that investors should be aware of, as macroeconomic headwinds could affect the company’s performance.

Analysts Targets

– RBC Capital Markets: Outperform rating with a price target of $290.00 (October 25, 2023).

– BMO Capital Markets: Outperform rating with a price target of $273.00 (October 25, 2023).

– Barclays: Overweight rating with a price target of $285.00 (October 25, 2023).

– Baird Equity Research: Outperform rating with a price target of $314 (January 18, 2024).

Bear Case

Is Visa’s growth sustainable in the face of potential economic challenges?

Analysts express caution over Visa’s ambitious guidance, which does not factor in possible macroeconomic challenges. Concerns linger about the sustainability of EPS and revenue growth as the post-COVID recovery stabilizes and as market penetration growth may slow down.

Could regulatory changes impact Visa’s profitability?

The company’s projections have not considered the potential impact of regulatory changes, such as those related to interchange fees. Any future regulatory tightening could pose a risk to Visa’s profitability and growth trajectory.

Bull Case

Can Visa’s strategic focus on new payment flows drive future growth?

Visa’s strategic investments in new payment flows and value-added services are expected to be key growth drivers. Analysts are optimistic about the company’s ability to leverage these areas for future expansion, supported by a strong capital return program.

Will Visa’s robust financial performance continue?

Given Visa’s solid fiscal quarter four performance and positive outlook for fiscal year 2024, there is a strong case for the company’s continued financial health. Analysts anticipate consistent growth driven by favorable spending trends and Visa’s strategic initiatives.

SWOT Analysis

Strengths:

– Strong brand and market position.

– Diverse and innovative product offerings.

– Solid financial performance with revenue and EPS growth.

Weaknesses:

– Potential vulnerability to economic downturns.

– Regulatory risks that could impact profitability.

Opportunities:

– Expansion into new payment flows and services.

– Growth in cross-border transactions and digital payments.

Threats:

– Macroeconomic uncertainties and potential downturns.

– Increasing competition in the payments industry.

The timeframe for the analyses used in this article ranges from October 2023 to January 2024.

InvestingPro Insights

Visa Inc. (NYSE: V) is a prominent player in the financial services industry, and a deep dive into the company’s data on InvestingPro reveals some compelling metrics that may interest investors. With a market capitalization of $560.66 billion, Visa stands as a financial behemoth whose scale and reach are reflected in its financials. The company’s P/E ratio, while high at 32.14, may be justified by its consistent performance and dominant market position.

An InvestingPro Tip highlights Visa’s admirable track record of raising its dividend for 16 consecutive years, signaling a strong commitment to returning value to shareholders. This is consistent with the company’s recent announcement of a 15% increase in its dividend and aligns with the robust capital allocation strategy emphasized in the article.

Other notable InvestingPro Data points include a Gross Profit Margin for the last twelve months as of Q1 2024 at an impressive 97.78%, underlining Visa’s operational efficiency. Furthermore, the company’s Revenue Growth over the same period stands at 10.48%, showcasing its ability to grow its top line effectively.

Investors looking for additional insights and tips can find them on InvestingPro. There are currently 11 additional InvestingPro Tips available for Visa, which can provide a more nuanced understanding of the company’s financial health and market position. These tips are accessible through the InvestingPro platform at https://www.investing.com/pro/V, offering a valuable resource for those who wish to delve deeper into Visa’s investment potential.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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Business

Brazilians rally to protest supreme court judge’s decision to ban X

Published

4 hours ago

September 7, 2024

Michael Pooler

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Tens of thousands of Brazilians joined an independence day rally called by members of the rightwing opposition in protest against a supreme court judge who banned Elon Musk’s social media platform X in the country.

Dressed in the national colours of yellow and green, attendees at Saturday’s demonstration in São Paulo held posters demanding the removal of justice Alexandre de Moraes, who has attracted controversy for a wide-ranging crackdown on digital disinformation.

“I came here today in favour of freedom of expression. The constitution is being violated,” said 25 year-old radiologist Mayara Ribeira, wearing the shirt of the Brazilian football team. “The judge should be impeached”.

X went offline in Latin America’s most populous nation just over a week ago after it ignored court orders to block certain accounts suspected of spreading falsehoods, many belonging to supporters of former hard-right president Jair Bolsonaro.

It affected some 20mn users and marked an escalation of a months-long row over takedown decrees between Musk and Moraes, whom the tech entrepreneur has accused of censorship.

“I don’t want anybody to be silenced, if they are leftwing or rightwing,” said retiree Elayne Nunes, 58, who travelled from the neighbouring state of Minas Gerais. “I’m happy that Elon Musk has brought to international attention what is happening in Brazil”.

The case has turned into a cause célèbre in the global debate about online free speech and energised Brazil’s populist conservative movement, which claims to be unfairly targeted by the judge.

Allies of Moraes frame his actions as necessary to safeguard democracy against fake news, but opponents accuse him of eroding liberties.

The blackout of X has divided opinion in Brazil. A survey by AtlasIntel found nearly 51 per cent of respondents disagreed with the ban, versus just over 48 per cent in favour.

Speakers at the event on Avenida Paulista urged senators to launch an impeachment of the judge, who has also become a target for wider criticisms that Brazil’s supreme court is overreaching its legal limits.

They also appealed for an amnesty for people arrested in connection with the storming of government buildings in Brasília on January 8, 2023 by radical Bolsonaro supporters.

Many of the rioters called for a military coup against leftwing president Luiz Inácio Lula da Silva, who defeated Bolsonaro in the previous year’s election.

“I hope that the federal senate puts a stop to this dictator Alexandre de Moraes, who does more harm to Brazil than Luiz Inácio Lula da Silva himself,” Bolsonaro said on stage.

The ex-president faces a number of supreme court investigations from his time in office, including over an alleged coup plot — that was never implemented — to stay in power.

Researchers at the University of São Paulo estimated there were 45,400 people at Saturday’s event in Brazil’s largest city.

The trigger for X’s suspension was its failure to meet a deadline set by Moraes to appoint a new legal representative in the country, as required by domestic law. Musk had closed the company’s local office last month in protest at the judge’s orders.

In his decision to block access to the platform, Moraes said X was seeking to create an environment of “total impunity” and a “lawless land” on Brazilian social media ahead of municipal elections next month.

Creomar de Souza at consultancy Dharma Political Risk said impeachment of the justice was unlikely for now: “It looks like we’re in for a long battle between Moraes and political forces in Brazil and abroad”.

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Business

Russia economy: Relying more China’s yuan is backfiring

Published

6 hours ago

September 7, 2024

Jason Ma

After the U.S. and its allies sanctioned Russia in 2022 for its invasion of Ukraine, Moscow turned away from the dollar and euro in international transactions and relied more on China’s yuan.

That coincided with more trade between the two countries as Russia was largely shut out of Western markets as well as the global financial system.

By June, the yuan accounted for 99.6% of the Russian foreign exchange market, according to Bloomberg, which cited data from Russia’s central bank. And Russian commercial banks ramped up corporate loans denominated in yuan.

But this dependence on the yuan is now backfiring as top Russian banks are running out of the Chinese currency, Reuters reported on Thursday.

“We cannot lend in yuan because we have nothing to cover our foreign currency positions with,” German Gref, CEO of top Russian lender Sberbank, said at an economic forum.

That’s because the U.S. expanded its definition of Russia’s military industry earlier this year, thereby widening the potential scope of Chinese firms that could get hit with secondary sanctions for doing business with Moscow.

As a result, Chinese banks have been reluctant to transfer yuan to Russian counterparts while servicing foreign trade payments, leaving transactions in limbo for months. With yuan liquidity drying up from China, Russian companies have tapped the central bank for yuan via currency swaps.

At the start of this month, banks raised a record 35 billion yuan from Russian’s central bank through these swaps, according to Reuters. And banks were expecting more help.

“I think the central bank can do something,” Andrei Kostin, CEO of second-largest bank VTB, said Thursday. “They hopefully understand the need to increase the liquidity offer through swaps.”

But on Friday, Russia’s central bank dashed those hopes, calling on banks to curb corporate loans denominated in yuan.

The Bank of Russia also said in a report that swaps are only meant for short-term stabilization of the domestic currency market and are not a long-term source of funding, according to Bloomberg. But rather than simply filling the roles that dollars and euros did, yuan loans have expanded.

“The increase in yuan lending was partly caused by the replacement of loans in ‘toxic’ currencies, but 41% of the increase was down to new currency loans,” the bank said.

The central bank also released a survey that showed a quarter of Russian exporters had trouble with foreign counterparts, including blocked or returned payments even when dealing in supposedly friendly countries. And about half of exporters said the problems got worse in the second quarter from the prior quarter.

The overall Russian economy has been propped up by the government’s wartime spending as well as oil exports to China and India. But the combination of busy factories and labor shortages due to military mobilizations have stoked more inflation.

Researchers led by Yale’s Jeffrey Sonnenfeld warned the seemingly robust GDP data mask deeper problems in the economy.

“Simply put, Putin’s administration has prioritized military production over all else in the economy, at substantial cost,” they wrote. “While the defense industry expands, Russian consumers are increasingly burdened with debt, potentially setting the stage for a looming crisis. The excessive focus on military spending is crowding out productive investments in other sectors of the economy, stifling long-term growth prospects and innovation.”

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Business

ETFs are set to hit record inflows, but this wild card could change it

Published

12 hours ago

September 7, 2024

Natalie Zhang

Exchange-traded fund inflows have already topped monthly records in 2024, and managers think inflows could see an impact from the money market fund boom before year-end.

“With that $6 trillion plus parked in money market funds, I do think that is really the biggest wild card for the remainder of the year,” Nate Geraci, president of The ETF Store, told CNBC’s “ETF Edge” this week. “Whether it be flows into REIT ETFs or just the broader ETF market, that’s going to be a real potential catalyst here to watch.”

Total assets in money market funds set a new high of $6.24 trillion this past week, according to the Investment Company Institute. Assets have hit peak levels this year as investors wait for a Federal Reserve rate cut.

“If that yield comes down, the return on money market funds should come down as well,” said State Street Global Advisors’ Matt Bartolini in the same interview. “So as rates fall, we should expect to see some of that capital that has been on the sidelines in cash when cash was sort of cool again, start to go back into the marketplace.”

Bartolini, the firm’s head of SPDR Americas Research, sees that money moving into stocks, other higher-yielding areas of the fixed income marketplace and parts of the ETF market.

“I think one of the areas that I think is probably going to pick up a little bit more is around gold ETFs,” Bartolini added. “They’ve had about 2.2 billion of inflows the last three months, really strong close last year. So I think the future is still bright for the overall industry.”

Meanwhile, Geraci expects large, megacap ETFs to benefit. He also thinks the transition could be promising for ETF inflow levels as they approach 2021 records of $909 billion.

“Assuming stocks don’t experience a massive pullback, I think investors will continue to allocate here, and ETF inflows can break that record,” he said.

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