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A Look at Visa’s Key Growth Factors

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Dec. 6 2017, Updated 3:02 p.m. ET

Positive outlook

On November 14, 2017, the CFO of Visa (V), Vasant Prabhu, spoke at the UBS Global Technology Conference. Analyst Eric Wasserstrom initiated the discussion on a positive note by highlighting the company’s growth. According to Prabhu, the company has reached a turning point and is expected to show significant growth in the long term.

Prabhu noted that Visa has previously witnessed these inflection points in the past. After these inflection points, he noted that the company has demonstrated significant growth and is expected to maintain that trend.

Visa posted a net income margin of ~35.0% on an LTM (last-12-months) basis. Visa’s peers (XLF) American Express (AXP), PayPal Holdings (PYPL), and Discover Financial Services (DFS) reported net income margins of ~13.9%, ~12.7%, and ~23.8%, respectively, on an LTM basis.

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Digitization

Visa (V) is expected to benefit from the trend toward a cashless economy, which would be helped by e-commerce. Prabhu noted that in contrast to cash transactions, e-commerce is gaining a foothold that could increase usage of Visa’s products.

Because Visa could show strong growth on the back of digitization, technological advances are expected to ease the use of digitization. The other factor that could fuel Visa’s growth is the decreased cost of acceptance.

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