Visa released Q214 earnings pre-market on Thursday, July 24th. Net income for the quarter rose 11 percent to $1.36 billion, or $2.17 a share, from $1.23 billion or $1.88 a year earlier. Revenue increased 5% to $3.16 billion. Due to a series of nagging economic issues, the company trimmed its projections for annual revenue growth. The report also shows cross-border volume growth on a constant dollar basis was 7% for the quarter. On the end of Friday, Visa dropped 3.58% or $7.97 to $214.77.
Earlier on Thursday, Visa announced Visa Digital Solutions, an initiative geared toward secure payments using mobile phones and other devices.
After the U.S. imposed sanctions against Russia in March, President Vladimir Putin tried to create their own payments system. However, due to the lack of experience and technical support, the program failed. Instead, the Russia government agreed to pay millions of dollars to Visa and Mastercard to keep them in action in Russia. Although Visa only generated 2% of revenue from Russia, the stock has been very sensitive to the Ukraine-Russian standoff.
Visa is heavily reliant on transaction growth, but after a long battle between retailers and payment technology companies, the company determined transaction fees of 21 cents. In addition, there are more substitute companies that have been established such as mobile wallet, which can highly affect Visa’s future growth. The investment thesis is intact, but it may be affected by the above reason in the future.
I have reiterated my price target of $246, representing 15% upside from Fridays closing price.