We came across a bullish thesis on Visa Inc. (V) on FluentInValue’s Substack by Yorrin van der Graaf. In this article, we will summarize the bulls’ thesis on V. Visa Inc. (V)’s share was trading at $309.48 as of Nov 13th. V’s trailing and forward P/E were 31.81 and 27.55 respectively according to Yahoo Finance.
siam sompunya
Visa Inc., a global payments technology giant, stands at the forefront of digital transactions, connecting consumers, merchants, financial institutions, businesses, and governments through its robust VisaNet processing network. This network facilitates authorization, clearing, and settlement of payment transactions, underpinning Visa’s core strength. The company’s extensive reach and network effects create a powerful cycle of increasing value: as more merchants accept Visa, its utility and appeal to consumers grow, driving further merchant adoption. This self-reinforcing network fosters substantial competitive advantages, making Visa a dominant force with a durable market position across over 200 countries.
Visa’s growth is primarily fueled by the ongoing shift toward a cashless society, accelerated by digital transformation globally. Despite significant inroads into electronic payments, cash still dominates transactions in many emerging markets, presenting a long runway for growth. The declining usage of cash—down to 16% of transactions in 2024, as reported by the Federal Reserve—underscores a shift towards digital payments, especially among younger generations who overwhelmingly prefer contactless and mobile options. Demographic and technological trends, especially among Gen Z and Millennials, further support this trajectory, as these groups drive adoption of digital wallets and other cashless solutions.
Visa’s business model is resilient across various demographics and regions, with adaptability to varying preferences by age, income, and geography. Higher-income individuals favor credit cards for rewards and convenience, while lower-income users rely more on cash and debit. Globally, urban users lean toward digital payments, while rural and some international markets remain cash-reliant due to infrastructure limitations. Additionally, emerging digital trends, such as the growth of e-commerce and digital wallet adoption in Asia and other high-growth markets, provide Visa with expansion opportunities as these regions transition to cashless systems.
Visa’s financial health and profitability further underscore its investment appeal. The company’s high Return on Invested Capital (ROIC) of 25.7% and Return on Capital Employed (ROCE) of 35.6% reflect efficient capital use and strong returns. Visa’s profit margins—an impressive 97% gross margin and steadily rising net profit and free cash flow margins—highlight its operational efficiency and robust cash generation. These metrics reinforce Visa’s ability to invest in growth, return capital to shareholders, and withstand market fluctuations.
Visa’s valuation reflects a strong investment opportunity, with multiple valuation methods pointing to an average intrinsic value of $354.45 per share. The gap between Visa’s current market price and its intrinsic value suggests a 20% margin of safety, presenting a compelling investment opportunity. Investors can benefit from Visa’s dominant market position, scalable network, and robust growth prospects, all of which justify its premium valuation. Despite its large size, Visa continues to demonstrate consistent revenue growth across its service segments, high free cash flow generation, and a solid outlook for long-term value creation. Analysts believe Visa’s shares have significant upside potential, driven by its ability to maintain strong margins, capture additional market share, and leverage the ongoing evolution of the global payments sector.
Visa Inc. (V) is on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 163 hedge fund portfolios held V at the end of the second quarter which was 166 in the previous quarter. While we acknowledge the risk and potential of V as an investment, our conviction lies in the belief that some 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: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article was originally published at Insider Monkey.