5. Visa Inc. (NYSE:V)
Warren Buffett’s First Major Purchase: 2011
Berkshire Hathaway’s stake in Q3 2024: $2.28 billion
Visa Inc. (NYSE:V) is a pioneer in digital payments that connects 4 billion account holders to over 130 million merchants and 14,500 financial institutions in more than 200 markets. Thus, Visa Inc. (NYSE:V) is considered a major force in the world economy. Just last year, the Visa network processed 639 million transactions per day, or 234 billion transactions in total.
Visa Inc. (NYSE:V) recently enacted a strategic investment in Nigerian fintech company Moniepoint, exhibiting the company’s commitment to promoting the growth of small and medium-sized businesses across the African continent. Furthermore, Visa Inc. (NYSE:V) purchased Featurespace, a company that specializes in using artificial intelligence technology to secure payments. Visa hopes that the acquisition will strengthen its fraud detection and risk-scoring capabilities.
On January 24, Piper Sandler raised its target price for Visa Inc. (NYSE:V) from $322 to $368, maintaining an Overweight rating. It’s expected that the company will continue to work on incorporating AI into its offerings, particularly with the addition of GenAI to its technology stack and upgrades to Visa Account Attack Intelligence (VAAI). Piper Sandler analysts believe that these moves will eventually allow Visa Inc. (NYSE:V) to reduce its fraud losses even further.
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.”
