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Visa: Executing Despite Headwinds

Summary

  • Visa continues to execute despite multiple macro headwinds.
  • Visa has an excellent existing model but might be able to augment it with an addition via M&A - specifically with Visa Europe.
  • Even should we see a macro market correction, expect Visa to continue to be valued at a premium multiple to directly and indirectly comparable peers.

Visa (NYSE:V) is out with a strong quarter that should bode well for it into what is appearing like a continued macro market environment of high levels of volatility. Visa has been under some selling pressure, as has every other listed name, but it has largely weathered what has been an up and down market. It should have and it should continue to. Visa has again shown itself to be best of class, and I'll include some imperfect comparables in this assessment as well as what I would deem as close comparables, and has shown an ability to fight through a laundry list of headwinds.

Of course, this usually starts with management. Visa management, while making note of the headwinds the company has faced (on the FQ3/15 investor call), has promised to be able to find a way to continue performing. This is a defined contrast from the tone on the American Express (NYSE:AXP) Q2/15 investor call in which American Express management leaned hard into every excuse in the book and proceeded to warn against future periods. Again, while noting many of the same causes for difficult operating environments, Visa performed regardless. Management has positioned the company to do well and it is.

That being said, Visa did note that it may or may not (and really this was the company doing analysts a favor in making this quite obvious) have the luxury of purchasing back shares to help bump EPS. Visa, it appears, is moving closer and closer to a marriage with Visa Europe. I think if this consummation takes place that Visa NewCo will have plenty to say about EPS expansion driven from synergy optimization and overall overlap cost cutting. If I'm long Visa, I'm OK without the immediate term, single quarter EPS bump from buybacks potentially being restricted.


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