1. Visa Inc. (NYSE:V)
Number of Hedge Fund Investors: 163
The biggest payment processor globally is Visa Inc. (NYSE:V). It handled about $15 trillion in total volume in the fiscal year 2023. It is present in more than 200 nations and accepts payments in more than 160 currencies. Over 65,000 transactions can be processed by its systems in a second.
Visa Inc. (NYSE:V) maintains a cost advantage over its competitors due to the strength of its payment network, which makes it extremely hard to replicate. In fact, the firm has partnerships with over 15,000 financial institutions worldwide and has issued over 3.8 billion Visa cards that are accepted at over 100 million retail locations. Consequently, the company enjoys tremendous profitability.
The company facilitates card transactions by serving as an intermediary between consumers, retailers, and banks. It receives a small cut of the “swipe fee,” about 25 basis points, with the majority of the cost going toward funding merchant rewards programs for customers.
It’s vital to note that Visa does not own or service any of the debt incurred by using its credit cards. As a result, it is not responsible for the $1.14 trillion in consumer credit card debt owed in the United States. This means that its profits and business strategy are generally risk-free, as it does not rely on interest and principal payments for revenue.
Despite economic worries, Visa’s Q2 2024 performance exceeded Wall Street projections due to solid consumer spending on restaurants and travel. Post-earnings, the company’s shares jumped by 2.7%. Except for transactions within Europe, Visa’s payment volume climbed by 8% YoY. This points to a robust demand for international travel, particularly from the United States and Europe. Travel in the Asia-Pacific region did not, however, rebound as quickly as anticipated. The expansion of e-commerce aided in counteracting regional weakness.
The largest payment processor’s net revenue of $8.8 billion surpassed predictions of $8.62 billion, and its adjusted earnings per share of $2.51 outpaced estimates of $2.44. Analysts view Visa’s reaffirmation of its 2024 revenue and profit estimates as a good indication despite industry concerns.
Dan Dolev, senior analyst at Mizuho stated:
“There were a lot of investors who thought that they would have to cut the guidance, and the fact that they did not, is a positive for Visa.”
Aristotle Atlantic Focus Growth Strategy stated the following regarding Visa Inc. (NYSE:V) in its Q2 2024 investor letter:
“Visa Inc. (NYSE:V) detracted from portfolio performance in the second quarter despite a solid earnings report early in the quarter that highlighted continued growth in payment volumes and value-added services. However, shares declined late in the quarter due to a court denying a proposed settlement that would have ended interchange fee-related litigation between Visa, Mastercard and merchant plaintiffs. As a result, uncertainty surrounding the possible outcomes of the litigation has created an overhang for Visa’s shares, even though interchange fees are charged by card-issuing financial institutions, not networks like Visa and Mastercard.”
Analysts believe that the company’s recent $30 billion settlement with Mastercard to limit card charges won’t have a significant effect on its financial performance.
Chris Hohn’s TCI Fund Management is the largest shareholder in the company, with 16,797,187 shares worth $4.408 billion.
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