Visa has been the volume leader of the pack of credit card brands in the US and this viewpoint indicates that’s not about to change. As a payments processor and facilitator, Visa avoids some of the risks and pitfalls suffered by banks and other financial institutions.
Visa is a pervasive brand best known for its eponymous credit card, but it is also a diverse payments technology company that aggressively embraces the latest innovations in payments and cybersecurity. Rather than get knocked off its perch as the largest company of its type, Visa adeptly co-opts any threats, making it a wise stock investment over the long haul.
Case in point: Visa partnered with Apple to unveil the much-ballyhooed Apple Pay, the successful mobile-payments platform. These proactive strategic moves help give Visa a jump on smaller rivals such as Mastercard.
Some consumers still harbor misconceptions about Visa. The company isn’t a bank, doesn’t issue cards, and doesn’t extend credit or set rates and fees for consumers.
Visa links businesses with consumers in more than 200 countries through fast and secure electronic payments. VisaNet, the company’s processing, can reliably handle more than 30,000 transaction messages per second.
In its massive rebranding campaign, Visa is still everywhere you want to be. Recent market swings have had little, if any, negative effect on the stock, and with solid forward-looking fundamentals, there is nothing but upside for this long play.
The company holds a dominant market position and is well insulated from many of its competitors. Investors should add this stock to their portfolios as it continues to grow at a breakneck pace.
The company’s market capitalization is about $190 billion, with a price-to-earnings ratio of 29.8, fiscal first-quarter adjusted earnings per share of 69 cents and a small dividend yield of 0.72%. Institutions own 94% of Visa, making it one of the most trusted stocks in the market.
Visa held a 47% market share by network purchase volume last year, compared with American Express at 25%, Discover Financial Services at 4% and Mastercard at 23%, according to credit card comparison Web site Card Hub.
Visa continues to be active in technology partnerships as they recently launched their developer platform, enabling third party software firms access to hundreds of vertical market APIs. Watch for other initiatives such as Visa Checkout for online users and the newly announced pre-paid Starbucks card, as Visa tries to stay one swipe, dip, or tap, ahead of the competition.
Overview by Raymond Pucci, Associate Director, Research Services at Mercator Advisory Group
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