Visa Q3 - A Beat, No Guidance

Visa was out with third quarter results after the bell last night. At first glance they seemed to be in line with revised expectations, both in terms of transaction volumes and profits. Further earnings guidance for the rest of the year was not provided, but the tone of management commentary was confident. The stock softened a bit after hours.

I will remind you again that Visa is not a bank or a money lender. It owns and operates a global network which connects banks and merchants, enabling them to serve customers at the point of sale by moving money about. In the process, Visa earns interchange fees.

Visa stock traded at an all-time high of $214 per share on the 20th of February, in the pre-Covid era. It then proceeded to hit a low of $134 in March, in the midst of the crisis. That's a nasty slide! It has since recovered to about $195 per share. We have advised clients to hold them throughout, and do nothing.

The San Francisco-based firm now connects more than 61 million merchants with customers holding 3.4 billion Visa-branded, bank-issued cards. The value of transactions in 2019 was $9 trillion, which is equivalent to over a tenth of global GDP. In the last decade, Visa's revenues have grown by a steady 10% a year, reaching $23 billion in 2019.

Covid-19 lockdowns slowed consumer spending by about 15% over this period, but the number of card transaction is up sharply, as people shy away from using grubby banknotes. Contactless "tap-to-pay", that's the way to go. Online shopping is also up a lot.

The virus outbreak has resulted in significant, 37% decline in the highly profitable multi-currency travel and cross-border business. It is not clear how long it will take for that business to return, but return it will. At this point traffic through airports is still about 70% lower than this time last year.

Accumulate more Visa shares now! This stock should be the anchor tenant in your investment portfolio.