Predicting the Future Position of Visa Shares in the Next Three Years
It seems like a great moment to consider investing in Visa (V, 0.76%). This credit card titan is known for its resilience, thriving in both good and bad economic climates. The market has been setting new records since the elections, which is beneficial for Visa and its investors.
Will Visa continue its success? Let's ponder where investors might find it in the next three years.
The Master of Credit Cards
Visa operates the largest global credit card network, handling 4.5 billion cards worldwide and collaborating with 14,500 financial institution partners. Over the last four reported quarters, it managed nearly $16 trillion in payment volume.
It's established the premier payment network and is a significant player in the world economy. There aren't many such networks—the major ones belong to Visa, Mastercard, and American Express. There's also Discover, a smaller company currently being acquired by Capital One Financial. While this adds some competition to keep fees in check, the limited options ensure each player enjoys a substantial share of the market.
Despite shifting economic conditions and inflation rates, Visa has impressively maintained its performance. Consumers continue to make purchases, and they frequently opt for Visa-branded cards. In its fiscal 2027 fourth quarter, which ended on September 30, revenue increased by 12% year over year, and it marked a 10% growth for the entire fiscal year.
Although moving money within its network remains Visa's primary business, it's also expanding into additional services and small business solutions. For instance, it boasts a new digital payments sector called Visa Direct in its "new flows" category. Visa Direct provides instant electronic payments worldwide, with Visa Direct transactions rising by 38% year over year in the fiscal fourth quarter to $2.8 billion. Revenue from the new flows category also saw an overall growth of 22%.
Its secondary, significant non-core category is value-added services. In the fourth quarter, revenue also saw a 22% year-over-year growth. Visa offers a wide array of small business solutions beyond simple card transactions. Such innovations enhance the core business and widen the company's total potential.
In the next three years, regardless of the economic climate, Visa is expected to have more credit card holders and collaborate with more financial institutions. It's also likely to have higher revenue. If the economy improves, its performance will be even more impressive.
Unrivaled Profit Margins
At Visa's scale, it consistently delivers increasing profits. It operates a capital-light business, making money every time a card is used, and it can expand its presence in the payments sector without incurring significant costs. Its profit margins are extraordinarily high and are only getting better.
Earnings per share (EPS) increased by 17% year over year in the fourth quarter and for the entire year. Visa's business model is conducive to profitability, and its commitment to maintaining its dominant position and growing its business in new directions should ensure continued healthy profitability over the next three years and beyond.
Outpacing the Market
Visa stock has outperformed the market over the past three years, despite unfavorable macroeconomic conditions.
This represents a specific time period, and as you examine longer spans, Visa's superiority to the broader market becomes more evident. Expect Visa to keep outperforming the market and potentially gain an even larger lead under better circumstances.
Given Visa's consistent performance and market outperformance, investing in finance through Visa can be a strategic move. This is especially true considering its strong financials and high profit margins, as seen in its EPS growth of 17% in the last year. With its expanded services and increased collaborations, Visa is poised to continue generating money and potentially yield even more returns for its investors.
