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.
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