In this article, we will discuss: 10 Best Credit Card Stocks to Buy Now.
The market for credit card issuance services has expanded significantly over the last several years. At a CAGR of 9.2%, it will grow from $478.09 billion in 2023 to $522.22 billion in 2024, according to the Business Research Company. Over the coming years, a significant expansion in the market size for credit card issuance services is anticipated. At a CAGR of 8.3%, it will increase to $717.7 billion in 2028, as per the research. Contactless payment usage, data security concerns, cryptocurrency emergence, embedded finance, customization, and personalization are all factors contributing to the growth in the projection period.
The credit card market is still changing, mirroring changes in customer preferences and general economic conditions. According to the Q4 2023 Quarterly Credit Industry Insights Report (CIIR), the average credit card debt per borrower at the end of 2023 was $6,360, a 10% rise YoY. This resulted in a total of $1.13 trillion in credit card debt in the United States the same year. Moreover, the average amount owed by households in the 90th percentile is $11,210, with higher-income households often having larger loads.
According to TransUnion, credit card usage continues to rise, with 167.2 million users expected by mid-2023, representing a substantial rise over the last three years. Furthermore, according to the Federal Reserve Bank of San Francisco, credit cards accounted for 31% of all payments in 2022, although less than 10% of Americans typically utilized cash, according to a December 2023 Forbes Advisor survey.
As per the Federal Reserve Board, credit card delinquency rates have been rising gradually and will reach 3.1% by the end of 2023, the highest level since 2011. Additionally, charge-offs rose in Q2 2024 from 4.16% to 4.38%, a record high of 12.5 years that hasn’t been seen since Q4 2011. Meanwhile, according to Forbes Advisor, the average credit card interest rate in March 2024 was 27.89%, putting financial strain on people with balances.
In the future, digital payment methods are expected to gain popularity; according to a survey conducted in August 2023, more than half of customers preferred digital wallets over traditional cards. This change shows that credit card companies will continue to innovate, even as concerns about interest rates and debt levels persist.
Overall, as we have also mentioned in our article, “7 Best American Bank Stocks To Buy According to Hedge Funds,” the U.S. market for digital banking platforms was estimated at $1.04 billion in 2024 and is projected to grow at a CAGR of 9.63% to reach $2.04 billion by 2031.
Looking forward, according to a report, credit card spending is predicted to increase in the mid-single digits by 2024, while balances will fall to the mid-to-high single digits after a substantial rise since 2022. If labor markets are steady, credit performance measures are expected to decline during 2024 and stabilize by early 2025. Despite lower inflation, key problems include resumed student debt payments, high interest rates, and growing living costs.
Yanni Koulouriotis, CFA, Vice President – Global FIG stated:
“Overall, DBRS Morningstar expects a less favorable operating environment for credit card issuers in 2024 as consumer dynamics shift and are less of tailwind to credit card issuer performance. While we expect weaker financial performance in 2024 compared to 2023, we still expect performance to be supportive of current credit ratings.”
With that said, here are the 10 Best Credit Card Stocks to Buy Now.
A technician inserting a credit card into a point-of-sale machine for identity authentication.
Methodology:
We sifted through holdings of credit card ETFs and online rankings to form an initial list of 20 credit card stocks. Then we selected the 10 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024. We have used the stock’s market cap as a tie-breaker in case two or more stocks have the same number of hedge funds invested.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
10. U.S. Bancorp (NYSE:USB)
Number of Hedge Fund Investors: 48
One of the biggest regional banks in the US, U.S. Bancorp (NYSE:USB) offers a wide range of financial services and has branches in about 26 states, mostly in the West and Midwest. The bank provides a wide range of services, such as credit cards, mortgages, trust and wealth management, retail and commercial banking, and other payment options.
It is the biggest non-GSIB in the United States. Its operating efficiency and equity returns over the last 15 years are matched by a few domestic competitors.
The USB card business has been steadily expanding. Card revenues represented 14.9% of total non-interest income as of June 30, 2024, up 4.9% from the same period in 2023. By the end of June 30, 2024, credit card loans accounted for 31.5% of all loans, up from 28.4% on that date in 2023, demonstrating its growing attention to the credit card industry and its strategic alliances, such as those with Greenlight Financial Technology and Edward Jones.
The U.S. Bank Smartly Savings and Visa Signature Card are two new credit card products that U.S. Bancorp is introducing to improve its credit card portfolio. Competitive interest rates up to 4.1% APY are available on the Smartly Savings account, and up to 4% cash back on all purchases can be earned with the Smartly Visa Signature Card. Together, these products are made to maximize savings and benefits.
Ebrahim Poonawala of Bank of America has maintained his Buy rating on the company and increased the price target to $53 from $49.00. He grounds this on the company’s solid Q2 EPS, better-than-expected revenue growth, and assurance in NII projections. He draws attention to the stock’s competitively advantageous value, which is supported by a varied income stream and a strong dividend yield.
Artisan Value Fund stated the following regarding U.S. Bancorp (NYSE:USB) in its fourth quarter 2023 investor letter:
“Banks were well represented among our top Q4 performers as the Treasury market rally drove big gains in the bank stocks. U.S. Bancorp (NYSE:USB), PNC Financial Services (PNC) and Bank of America—the three banks we hold in the portfolio—were each among our top five contributors to return. When bank stocks sold off in Q1 due to fears of contagion following Silicon Valley Bank’s failure, we took advantage of the market dislocation by purchasing top-10 US banks USB and PNC at what were, in our view, cheap prices. USB and PNC are banks we have known for years. They are well managed and well capitalized. As large banks, they were less impacted by the turmoil that affected smaller institutions as depositors sought the safest places to store their money. The recent rebound is an example of how our approach of investing in out-of-favor businesses can lead to alpha. USB and PNC are not immune from industry-wide headwinds from higher deposit costs, pressured net interest margins and fleeing deposits. However, we did not see these banks having a similar level of risk, with respect to uninsured deposits and unrealized losses, which contributed in varying degrees to the collapses of other banks in March 2023. As investors, we cannot avoid risk. However, we are willing to take risk if we are being compensated appropriately.”
Andreas Halvorsen’s Viking Global is the largest shareholder in the company, with 25,404,913 shares worth $1.008 billion.
9. Capital One Financial Corporation (NYSE:COF)
Number of Hedge Fund Investors: 65
Capital One Financial Corporation (NYSE:COF), a holding company offering a range of financial services, is situated in McLean, Virginia. Credit card lending, auto loans, and commercial lending are currently the company’s primary business activities. The company was created in 1994 as a spinoff of Signet Financial’s credit card division.
The fourth-largest credit card issuer in the world agreed to pay over $35 billion to acquire its rival, Discover Financial Services. If the deal goes through, Capital One will take over as the sixth-largest bank in the United States, with over $450 million in deposits.
The company grows nationally despite having a smaller branch network by using its online and mobile platforms for client acquisition and support. By using this strategy, the business can benefit from having a large financial institution without having to pay the high maintenance costs associated with having a large branch network.
The firm’s net interest income during the second quarter of 2024 came from its consumer division, which accounted for only around 25% of the company’s overall revenue. A substantially larger 70% of this came from the bank’s credit card operation. Although most banks make a sizable profit from credit cards, Capital One Financial views credit cards as “the” business.
Given COF’s strong Q2 profits, reduced operational costs, and stronger credit performance, Jefferies analyst John Hecht upgraded Capital One Financial Corporation (NYSE:COF) to a Buy rating and raised the price target from $165 to $170. Hecht also outlined the strategic steps Capital One has made to facilitate future expansion, including customer acquisition efforts and the company’s efficient administration of the Walmart contract.
Ariel Global Fund stated the following regarding Capital One Financial Corporation (NYSE:COF) in its first quarter 2024 investor letter:
“We also added global financial services company, Capital One Financial Corporation (NYSE:COF). The company is the largest online consumer and commercial bank with a leading position in general purpose and small business credit cards. We view the company as competitively advantaged particularly due to their investment in technology. According to recent reports, COF is also rated as one of the leading banks within Artificial Intelligence (AI). Notably, the company recently announced an acquisition of Discover Financial Services (DFS) which we believe would produce significant long-term earnings accretion. COF will be able to leverage DFS’ proprietary payments network, enabling direct interaction with merchants and consumers. This closed loop dynamic should lead to higher volumes of credit card conversions presenting further upside for its shares. At current levels, we view the long-term outlook to be attractive, given favorable business trends, stabilizing delinquency rates within the credit card industry, synergies from the DFS acquisition and COF’s enhanced focus on technology.”
Natixis Global Asset Management’s Harris Associates is the largest shareholder in the company, with 15,180,437 shares worth $2.10 billion.
8. Discover Financial Services (NYSE:DFS)
Number of Hedge Fund Investors: 68
Market Cap as of September 9: 32.31 billion
The American bank Discover Financial Services (NYSE:DFS) operates in two different business segments: payment services and direct banking. It is also one of the largest card issuers in the USA. As one of the best credit card stocks to buy, the company produces both credit and debit cards, together with other consumer banking products.
Moreover, it runs the Diners Club, Pulse, and Discover networks. Based on total purchase volume, the Discover network ranks as the fourth-biggest payment network in the US, while Pulse is among the biggest ATM networks in the whole country.
Among its rivals, Discover has continuously produced returns on equity that are among the highest. The company showed resilience in Q2 2024 when it achieved 70% YoY growth in net income to $1.5 billion, mostly from the sale of its portfolio of private student loans and a successful settlement of lawsuits.
Capital One stated earlier this year that it will acquire DFS for $35.3 billion. Consumers may be impacted by the transaction in the future, although the agreement is not anticipated to be finished until late this year or early 2025. The companies are currently seeking permission from authorities and shareholders, and the proposal has already drawn attention from legislators across the political spectrum.
Despite the strong earnings from the American bank, analysts are still fixated on the possible deal. Due to increased competition in the Visa and MasterCard-dominated payment processing market, financial experts feel that the merger could benefit both Capital One and Discover Financial Services (NYSE:DFS). Since issuers would have to compete by providing more alluring credit card advantages, this increased competition may result in improved incentives and rewards for customers.
Barclays maintained its Equal Weight rating on the shares after the Q2 report 2024 and raised the company’s price target on Discover to $137 from $135. In a research note, the analyst informs investors that the company posted a strong beat and that credit is on pace.
Glenn Greenberg’s Brave Warrior Capital is the largest shareholder in the company, with 3,460,972 shares worth $452.73 million.
7. American Express Company (NYSE:AXP)
Number of Hedge Fund Investors: 68
Market Cap as of September 9: 173.51 billion
American Express Company (NYSE:AXP) is a multinational financial company that offers charge and credit card payment solutions to both consumers and businesses. It is the second largest card issuer behind JPMorgan, with over 112 million cards in circulation worldwide.
The firm is present in roughly 130 countries. Additionally, the business runs a very successful merchant payment network. It has been in business since 2018 and includes three segments: global merchant and network services, global consumer services, and global commercial services. The company’s commercial division provides business loans, consultancy services, and spending management systems in addition to payment products.
For a number of years, the company has experienced rapid expansion as record numbers of new cards have been acquired by the firm due to growing momentum with younger demographics and a recovery in travel and entertainment expenditure, which has increased payment volume. Net interest income increased by more than 69% between 2021 and 2023, revealing that AXP’s move to a younger cardholder base has also contributed to notable loan growth. Nevertheless, noninterest income still accounts for more than 75% of the firm’s total revenue, with the discount rate that the company charges retailers for accepting payments being its main revenue stream. This implies that the amount of money that consumers spend directly affects the income of the business.
With 9% YoY revenue growth propelled by robust performance across all categories, the company reported an outstanding EPS of $4.15, surpassing estimates of $3.26. The company’s long-term performance is supported by its premium customer base and 24 quarters of double-digit growth in card fee revenue.
Here is what Artisan Select Equity Fund said about American Express Company (NYSE:AXP), in its first quarter 2024 investor letter:
“American Express Company (NYSE:AXP) shares rose 22% this quarter. This is an interesting case study, given our earlier discussion about inflation. American Express operates one of the largest credit card networks in the world. Its revenue is primarily a function of a fee rate applied to the dollar value of goods and services that are transacted through its network. That dollar value is, of course, nominal. As inflation pushes up the value of those goods and services as it has for the past few years, American Express will capture that value through its fee structure. The past few years’ inflation has clearly been a benefit. Aside from its inherent inflation protection, the business is a very strong one. Payments continue to shift toward electronic forms, benefiting American Express. It also has a strong brand that attracts loyal and highly profitable customers that are the envy of the industry. Recent results have been strong with revenues moving nicely ahead of GDP.
While Berkshire owns $34.52 billion worth of stakes in American Express Company (NYSE:AXP), out of the more than 900 hedge funds tracked by Insider Monkey, 66 hedge funds reported owning stakes.”
Warren Buffett’s Berkshire Hathaway is the largest shareholder in the company, with 151,610,700 shares worth $35.11 billion.
6. Wells Fargo & Company (NYSE:WFC)
Number of Hedge Fund Investors: 83
Wells Fargo & Company (NYSE:WFC) is one of the biggest card issuers and is currently the fourth-largest bank in the US. It offers a comprehensive range of financial services and products and is present in 35 countries worldwide. The US-based financial company provides a wealth of financial education resources in addition to individualized assistance from financial consultants.
A significant component of the company’s consumer banking segment is its credit card operation. A variety of credit cards are available, such as travel, cashback, and rewards cards. Wells Fargo has concentrated on growing its credit card portfolio while strengthening its consumer relations in recent years. One such feature is the Active Cash Credit Card, which provides competitive cashback returns. The bank has been using its sizable client base and digital banking systems to develop its credit card portfolio and regain customers’ trust, even if it has faced some difficulties in the past.
In its second-quarter 2024 earnings report, Wells Fargo & Company (NYSE:WFC) exceeded both the top and bottom-line consensus estimates. Its net interest income, a key performance indicator for banks, did not meet expectations and has been falling since Q4 2022. The difference between interest revenue from loans and interest expenses is the bank’s net interest income, which fell by 9% last year and is presently predicted to fall by 8-9% this year.
Analysts forecast higher net interest income as part of the investor “bull thesis” heading into the quarter; therefore, management’s revised view for NII is expected to put pressure on the stock, according to Citigroup analyst Keith Horowitz in a note.
The American multinational financial services company intends to stick to its multi-year restructuring plan, focusing on cost-cutting initiatives to increase its efficiency ratio and imposing an asset cap through 2024. In addition, the bank is rebuilding its wealth division, middle-market investment banking, and card business.
Natixis Global Asset Management’s Harris Associates is the largest shareholder in the company, with 21,386,721 shares worth $1.27 billion.
5. Citigroup Inc. (NYSE:C)
Number of Hedge Fund Investors: 85
Citigroup Inc. (NYSE:C), the third-biggest U.S. lender, was founded in 1812 and is headquartered in New York. The company provides a range of financial services and products, such as credit cards with different features, loyalty programs, and benefits. Corporate/Other, Institutional Clients Group, and Global Consumer Banking are the segments through which it conducts business.
The US credit card and consumer banking divisions of Citigroup Inc. (NYSE:C) saw a 74% decline in profits from the previous year. Much of the increase in delinquent credit card borrowers drove the bank’s credit losses in those businesses, which increased to $2.3 billion in the Q2 2024 quarter from $1.5 billion the previous year. Revenue from credit cards issued on behalf of stores like Costco or Home Depot fell to 6% year over year. Nonetheless, the company is one of the key market players in the credit card market.
Given its obvious global presence, C’s most distinctive business is its commercial banking division. The banking company’s wide global reach has helped it to retain its reputation as the preferred bank for firms operating internationally.
The financial services multinational corporation is currently going through a strategic realignment because of its intricate global operations, which have made it challenging for the company to stay competitive. This entails taking important steps like reinvesting in wealth and commercial banking and restructuring its consumer operation in Mexico. It’s possible that the company may finally become structurally stronger.
Diamond Hill Capital Long-Short Fund stated the following regarding Citigroup Inc. (NYSE:C) in its first quarter 2024 investor letter:
“Other top Q1 contributors included Meta Platforms, Citigroup Inc. (NYSE:C) and Walt Disney. Banking and financial services company Citigroup’s restructuring efforts are ongoing, and it continues remediating regulatory issues and building capital in anticipation of increased requirements. The company expects to see expenses fall meaningfully in the second half of 2024, bolstering the outlook from here.”
The three most important aspects of Citi are its capitalization, burden, and solvency in relation to other banks. The financial company’s short-term performance may be impacted by high investment costs and ongoing regulatory scrutiny, but the company’s strategic exits and efficiency improvements are meant to boost future profitability.
Warren Buffett’s Berkshire Hathaway is the largest shareholder in the company, with 55,244,797 shares worth $3.51 billion.
4. Bank Of America Corporation (NYSE:BAC)
Number of Hedge Fund Investors: 92
After years of hardship and the 2008 financial crisis, Bank Of America Corporation (NYSE:BAC) is currently the second-biggest commercial bank in the United States in terms of total assets.
The bank is among the top four credit card issuers and acquirers in the United States, has a strong commercial banking franchise, and is a Tier 1 investment bank.
The four main business segments of BAC are Global Banking, Global Markets, Global Wealth & Investment Management (GWIM), and Consumer Banking. BAC offers a wide range of banking and nonbank financial services and products while lowering the risk connected with market downturns by diversifying its business.
Bank of America Corporation (NYSE:BAC) reported higher-than-expected earnings for the second fiscal quarter of 2024, owing to excellent performance in its investment banking segment as well as solid net interest income. The share price increased by more than 5% YoY as a result of the earnings report, reaching a peak not seen since the start of FY 2022.
In Q2 2024, total credit and debit spending of $243 billion was 3% YoY. In terms of credit cards, the average outstanding loan totaled $99 billion, consistent with Q1 2024 and up from $94.4 billion YoY. The net charge-off ratio was 3.9%, up from 2.6% last year and 3.6% in Q1 2024. During Q2 2024, 72% of credit card sales were digitally enabled, a rise from 70% last year. Hence, digital channels have provided Bank of America with opportunities for ongoing expansion, particularly in the area of credit card spending.
ClearBridge Value Equity Strategy stated the following regarding Bank of America Corporation (NYSE:BAC) in its first quarter 2024 investor letter:
“We added several new positions during the quarter. Our largest new addition was Bank of America Corporation (NYSE:BAC), one of the world’s leading financial institutions, serving some 66 million consumer and small business clients across the U.S. as well as large corporations, financial institutions and governments globally. We believe that the interest rate pressure that Bank of America faced in early 2023 has subsided, and risks surrounding deposit outflows have abated, which should allow the company to improve its book value and capital growth as well as benefit from a rebound of capital markets activity.”
BAC is one of the Best Credit Card Stocks to Buy Now since it has promising growth potential. As seen by 19 analysts, BAC has a consensus Buy rating with an average price target of $42.39 and an upside potential of 5.61% from the current stock price.
Warren Buffett’s Berkshire Hathaway is the largest shareholder in the company, with 1,032,852,006 shares worth $41.08 billion.
3. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Investors: 111
As the most profitable bank in the United States, JPMorgan Chase & Co. (NYSE:JPM) is unquestionably one of the “Biggest Financial Firms in the World,” with a market capitalization of $619.19 billion.
It is divided into four main sections: asset and wealth management, corporate and investment banking, commercial banking, and consumer and community banking. JPMorgan is regulated in multiple countries where it conducts business.
It is also an industry leader in total assets, dominating both investment and commercial banking. Its standing has been strengthened by its profitable ventures into credit cards and auto loans, as well as thoughtful fintech initiatives.
Among credit card issuers, JPMorgan Chase (NYSE:JPM) is the biggest. Just last year, 10 million new accounts were opened, and there are currently over 150 million cards in use. Although it gave $239 billion in new credit to individuals in 2023, it amounted to only 10% of the $2.3 trillion it gave to all clients, including companies, non-governmental organizations, and the government itself.
It should be mentioned that the company anticipates a rise in the number of credit card defaults by customers. Last year, its provision for credit card losses grew by 80%, reaching $6 billion. Nevertheless, it is a financial giant, too big to fail due to its dominant position in the banking industry.
The financial firm is attracting the eye of analysts. Despite market headwinds, Piper Sandler maintained its Overweight rating and $230 price target for the US-based company, highlighting the bank’s capacity to outperform competitors. The company does not foresee any major changes to JPM’s outlook and commended the bank for its effective risk profile, leading profitability, and cautious prediction.
Deutsche Bank, on the other hand, downgraded the company from Buy to Hold but maintained its target price of $235. The firm recognizes JPM’s year-to-date performance, outstanding credit quality, and higher-than-expected net interest income, but it sees little room for further increase. Reacting to growing unemployment, major firms like JPMorgan anticipate that the Federal Reserve will cut interest rates in September.
Carillon Eagle Growth & Income Fund stated the following regarding JPMorgan Chase & Co. (NYSE:JPM) in its first quarter 2024 investor letter:
“JPMorgan Chase & Co. (NYSE:JPM) contributed positively to performance following solid financial results and positive guidance for the remainder of 2024. Moreover, growing chatter around rising capital markets activity likely contributed to the stock’s strong performance relative to other banks. Recall that JPMorgan has a robust capital markets franchise.”
Ken Fisher’s Fisher Asset Management is the largest shareholder in the company, with 12,740,431 shares worth $2.58 billion.
2. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Investors: 142
Mastercard Incorporated (NYSE:MA), the world’s second-largest credit card payment network in the world, has handled volume approaching $9 trillion in 2023. Mastercard accepts payments in more than 200 nations and handles transactions in more than 150 currencies.
Along with payment gateway services, the company offers a variety of payment options, such as credit, debit, and prepaid cards.
The credit card payment network behemoth posted strong financial results in the second quarter of 2024, with a 17% YoY increase in profit to $3.3 billion. Earnings per share excluding one-time costs were $3.59, above market projections of $3.51. In addition to exceeding market forecasts, revenue increased by 13% YoY to $6.96 billion. Growth in major international markets like Europe and Latin America, along with a solid U.S. customer base, contributed to the impressive results.
In Q2 2024, Mastercard Incorporated (NYSE:MA) disclosed that the quantity and value of transactions executed on its credit card network increased by 11% YoY. Cross-border payment volume growth of 17% and solid consumer spending were credited for the positive result.
Given its reliance on consumer health, the company is susceptible to downturns in the economy, particularly if spending is curtailed as a result of the Fed’s rate hikes. Furthermore, pressure on low-income clients may affect transaction volumes, which could jeopardize long-term expansion.
Logan Purk, technology analyst for Edward Jones, stated, “Mastercard’s results, while not perfect, should give reassurance that the spending environment remains solid,”
L1 Capital International Fund stated the following regarding Mastercard Incorporated (NYSE:MA) in its Q2 2024 investor letter:
“The share prices of Mastercard Incorporated (NYSE:MA) and Visa, both long term Fund investments, have both drifted down over recent months. There have been no dramatic developments, but there has been a general slight softening in the rate of growth of consumer spending in the U.S. and globally, a court decision rejecting Mastercard and Visa’s proposed settlement of a long-lasting dispute with U.S. merchants as well as other modest adverse regulatory developments. We continue to view Mastercard and Visa as two of the highest quality businesses in the world, and both are well placed to continue to deliver attractive, risk adjusted returns to shareholders over time.”
Charles Akre’s Akre Capital Management is the largest shareholder in the company, with 4,039,349 shares worth $1.78 billion.
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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