Visa: Impending Slowdown In Growth

June 2, 2017

Originally published in partnership with Seeking Alpha - Due to contractual agreements, only the first paragraph with a hyperlink can be released here.

 

https://seekingalpha.com/article/4078062-visa-impending-slowdown-growth 

 

Summary

 

Visa has continued to be a best in-class large-cap growth stock however does this translate into a compelling investment opportunity given its lofty P/E ratio and potential slowing growth?

 

Visa has been posting great growth across all segments of its enterprise further accentuated by the

Visa Europe acquisition over the past year.

 

Now that the Visa Europe acquisition is complete and reflected in earnings, these year-over-year growth rates are largely attributable to Visa Europe and unsustainable.

 

After a full year of Visa Europe earnings on the books, these growth rates will likely slow down dramatically and any miss in future earnings could derail this stock.

 

Introduction:

 

Visa (NYSE: V) reported another great quarter with beats on both the top and bottom lines. EPS and revenue estimates were beat by $0.07 and $160 million, respectively. Since its earnings release, Visa has appreciated to all-time highs, currently sitting at $95 per share. The Visa Europe acquisition is beginning to bear fruit for the company, translating into phenomenal transaction and volume growth however this was expected and beginning with the initial quarter Visa started reporting the fully integrated company these numbers have been fantastic. Visa has been posting great growth across all segments of its enterprise further accentuated by the Visa Europe acquisition. Meanwhile the company continues to grow its dividends and engage in consistent share repurchases, announcing another $5 billion share buyback program in late April. Visa has continued to be a best in-class large-cap growth stock however does this translate into a compelling investment opportunity for a great long-term position? I always felt that Visa was a great long-term holding that offered growth and stability independent of banks and/or interest rates. Now that interest rates are on the rise, banks look more and more appealing. Does Visa run a risk of money flows away from peudeo-financials such as Visa to traditional banks? The fully integrated Visa enterprise in conjunction with major client wins will likely enable sustained and durable growth now and into the future however I feel that Visa is expensive and a pull-back may offer a better entry opportunity.

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