1. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 165
Visa Inc. (NYSE:V), a global leader in digital payments, connects 4 billion account holders to over 130 million merchants and 14,500 financial institutions in over 200 markets. Holding 52% of the U.S. credit card market, Visa Inc. (NYSE:V) is the dominant player in the US payments industry and a key facilitator of the global economy.
Back in December 2024, Morgan Stanley analyst James Faucette raised the price target for Visa Inc. (NYSE:V) from $326 to $371 and maintained an Overweight rating on the stock, which is currently its top payments and processing pick through 2025. The firm bases its opinion on Visa’s “attractive valuation,” benefits in travel and value-added services, reduced regulatory scrutiny, and favorable tactical trading dynamics.
The company’s fiscal year 2024 ended with decent financial results, including net revenue of $9.6 billion, up 12% from the previous year, and earnings per share rising 16% to $2.71 in the fourth quarter. By acquiring Prosa and Featurespace in 2025, Visa Inc. (NYSE:V) hopes to strengthen its operational framework and enhance its fraud prevention capabilities.
Mar Vista Global Strategy stated the following regarding Visa Inc. (NYSE:V) in its Q3 2024 investor letter:
“After lagging the broader markets over the last one, three, and five years, we believe Visa Inc.’s (NYSE:V) stock now reflects a more conservative and realistic expectation for future cash flow growth. The electronic transaction toll-taker has long enjoyed a highly defensible network effect that connects global buyers and sellers and scale advantages that keep upstart competitors from disrupting the industry’s economics. At the same time, Visa directly benefits from the secular trend of replacing cash with e-payments. Penetration rates and transaction volumes in developed markets will inevitably slow over the next five years yet we expect Visa revenues to grow 8-10% over our investment horizon. Key value drivers remain global consumer spending growth, e-transaction penetration, “new flows” expansion in areas like business-to-business transactions, and lastly, value-added client service growth.
Visa’s dominant position is reflected in its nearly pristine financials: 68% operating margins, greater than 70% incremental operating margins and only 3-4% capital expenditures as a percent of sales. Awash in excess capital, Visa is one of the more aggressive purchasers of its own stock. Shares outstanding over the last fifteen years have declined by one-third and we expect the company to continue to repurchase 2-3% of shares outstanding annually. Since the 2016 acquisition of Visa Europe, total returns on capital have expanded from 25% to 50% and we expect the metric to approach 100% over the next five years as net operating profits expand roughly 60% on a flat capital base. Overall, Visa should compound per share intrinsic value at 10-13% over the next five years.”
While we acknowledge the potential of V, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than V but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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