Thursday was a day filled with quarterly earnings from a variety of companies. While many ended up catching the attention of the financial press, some ended up failing to impress. Visa (NYSE: V) announced its recent Q4 2019 financial figures which were a mixed bag overall.
Although the company ended up reporting a record quarterly profit with consumer spending remaining strong, it wasn’t enough to stop a small selloff in the stock as the company ended up underperforming – if only slightly – in comparison to its overall revenue target.
Visa’s quarterly profit increased by 10% to $3.27 billion, while net revenue increased by the same percentage to $6.05 billion. However, Wall Street analysts had figured that the credit card company would report a revenue figure closer to $6.08 billion. While the difference is quite small, it didn’t stop shares of Visa from falling a little in after-hours trading.
For the most part, higher consumer spending has helped major credit card companies report record profits, with rivals such as American Express and Mastercard also having reported strong quarterly earnings this month.
However, perhaps the most interesting move that Visa has made recently is a $5.3 billion investment to buy out Plaid, which connects mobile-payment services and apps like Venmo to user’s bank accounts. While it’s somewhat of an unorthodox acquisition, Visa’s management thinks expanding into the fintech market is a natural extension of its services, and is something that not many other competitors (besides perhaps Mastercard) have been doing.
“Both Visa and Mastercard have been aggressively focusing on expanding their value-added services businesses via acquisitions with the objective of diversifying the existing revenue base while reducing dependence on the traditional transaction processing fees in order to avoid some of the same challenges impacting Visa’s current quarter,” added Wedbush analyst Moshe Katri according to MarketWatch.
Per-share profits are expected to increase in 2020 by somewhere around 15% while revenue should increase by a low double-digit percentage, although the pending Plaid acquisition hasn’t been factored into these figures. The company hasn’t said whether or not it expects the coronavirus outbreak in China to significantly impact the next quarter’s results. Many U.S. companies that are operating in the country have seen their share tumble significantly, although major credit card companies seem to not have been affected as much by this trend.
Shares of Visa ended up falling 2.5% in after-hours trading. While a small setback, most analysts aren’t all that worried by this little hurdle. Out of the 26 or so analysts covering the credit card company, 33 of them have some sort of “buy” rating, as opposed to just 2 “holds” and one “sell.” Although the stock seems like a decent buy if you’re looking for a long-term safe investment, it’s still questionable whether you are better off investing in one of Visa’s other rivals.
Visa Company Profile
Visa is the largest payment processor in the world. In fiscal 2019, it processed almost $9 trillion in purchase transactions. Visa operates in over 200 countries and processes transactions in over 160 currencies. Its systems are capable of processing over 65,000 transactions per second. – Warrior Trading News