Visa Stock Surges Amid Regulatory Challenges and Growing Earnings

Visa’s impressive performance outpaces its peers despite increasing scrutiny.

Visa stock (NYSE: V) has increased by approximately 22% year-to-date. In comparison, the S&P 500 index has risen by 23% during the same time frame, while Visa’s competitor, Mastercard (NYSE: MA), has also seen gains of about 23%. What factors are fueling Visa’s recent growth?

In its fourth quarter of FY 2024, Visa exceeded market expectations with net revenues of $9.6 billion, which reflects a year-over-year increase of 12%. Significant elements contributing to this growth include a 13% increase in cross-border volumes, driven by rising international travel and e-commerce. The company’s Total Processed Transactions increased by nearly 10%. If you seek a stable investment with less volatility than individual stocks, consider the High Quality portfolio, which has outperformed the S&P 500 and achieved over 91% returns since its launch.

Earnings are also on the rise, with adjusted net income climbing 13% year-over-year to $5.4 billion. Visa benefits from a business model characterized by high operating leverage, thanks to a vast network, high fixed costs, and lower variable costs. This structure allows profits to grow faster than revenues. Visa’s Adjusted EPS rose by 14%, boosted by a reduced share count following stock repurchases.

Looking back, Visa’s stock performance over the past four years has been inconsistent. It recorded returns of 0% in 2021, -3% in 2022, and a strong 26% in 2023. The Trefis High Quality (HQ) Portfolio, which includes 30 stocks, demonstrated less volatility and consistently outperformed the S&P 500 each year. The HQ Portfolio provides better returns with reduced risk, avoiding the roller-coaster experience typical of many stocks. So what lies ahead for Visa?

This year, Visa has faced some regulatory challenges. The U.S. Justice Department alleged that Visa operates a monopoly in the U.S. debit market by suppressing competition, a significant concern for the largest debit card issuer in the country as over 20% of its global transactions occur in this segment. However, since September, the stock has rebounded strongly, as investors appear to believe these challenges won’t impact Visa’s long-term prospects. Adjustments in operations could help maintain competitive practices.

Additionally, the election of Donald Trump as President might lead to a more favorable regulatory environment for financial companies, potentially easing antitrust measures. The Federal Reserve has also reduced interest rates three times since September, which may boost consumer spending, thus impacting Visa’s transaction volumes positively. Visa remains committed to enhancing shareholder value, reporting $6.8 billion in share repurchases and dividends for the fourth quarter. Recently, the company raised its quarterly cash dividend by 13% to $0.59 per share.We currently value Visa stock at about $309 per share, aligning closely with its market price. For a detailed analysis, see our assessment ofVisa’s valuation.

[1] Returns as of 12/19/2024
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.