We recently compiled a list of the 10 Best Digital Currency and Payments Stocks To Invest In. In this article, we are going to take a look at where Visa Inc. (NYSE:V) stands against the other digital currency and payments stocks.
The Digital Payment Revolution: Growth Trends and Insights
The digital currency and payments sector is rapidly evolving, driven by technological advancements and changing consumer expectations. Digital money continues to reshape how transactions are conducted, making them faster, cheaper, and more accessible. According to a report by The Business Research Company, the global digital payments market was valued at $115.93 billion in 2023. The market is expected to expand at a compound annual growth rate (CAGR) of 9.3% during 2024-2028 to reach a value of $180.26 billion by the end of the forecast period.
The rise of e-commerce and technology-driven initiatives is significantly boosting the digital payments market. Consumers are increasingly choosing non-cash payment methods because they are easier and more convenient for transactions. This trend is expected to lead to a growth in low-cost payment terminals and methods like QR codes in the near future.
A major driver behind this shift is the younger generations, particularly millennials and Generation Z, who are quick to adopt digital payment services. Online banking has become a popular choice among young users, who demand personalized and flexible experiences. As businesses adapt to these expectations, enhancing customer experience has become crucial for success in the competitive digital payment landscape.
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The McKinsey Digital Payments Survey 2024 reveals that the use of digital payments is steadily increasing in both the United States and Europe. Approximately 9 in 10 consumers in these regions have made at least one digital payment in the past year, with the US reaching a record high of 92%. In the US, in-app and in-store digital payments are growing rapidly. In-app purchases now account for 60% of digital payment usage, up by 8 percentage points since 2019. Additionally, the adoption of digital wallets for in-store transactions has risen from 19% in 2019 to 28% in 2024. This shift represents a significant market, with around $10 trillion spent annually by consumers across the United States and Europe.
Notably, the survey also found that about one in five users often leave their physical wallets at home, opting for digital payment methods instead. In-store digital wallet usage is similar between the US and several European countries. This also includes traditionally cash-heavy nations like Germany and Italy, where about a quarter of respondents reported using digital wallets for in-store purchases in the past year. This trend indicates a broader acceptance of digital payments among consumers across various markets.
Methodology
To compile our list of the 10 best digital currency and payments stocks to invest in, we consulted various online resources and also reviewed our own rankings. This exercise provided us with a list of the best digital money stocks. From an initial pool of more than 20 digital currency and payments stocks, we focused on the top 10 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s Q3 2024 database of 900 elite hedge funds. The 10 best digital currency and payments stocks to invest in are ranked in ascending order based on the number of hedge funds holding stakes in them.
Why do we care about what hedge funds do? 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).
A close-up of a person’s hand holding a credit card while using a mobile application to make a payment.
Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 165
Visa Inc. (NYSE:V) is a leading global digital payments company that facilitates electronic transactions across more than 200 countries. It operates primarily through Visa-branded credit, debit, and prepaid cards, providing essential infrastructure for financial institutions and merchants without directly issuing cards or extending credit. Visa Inc. (NYSE:V) is one of the best digital money stocks to buy.
On September 26, 2024, the company announced its plan to acquire Featurespace, a firm specializing in real-time AI technology for fraud prevention. This acquisition aims to enhance Visa Inc.’s (NYSE:V) capabilities in combating payment fraud and is expected to close in fiscal 2025, pending regulatory approvals. Such strategic moves underline Visa Inc.’s (NYSE:V) commitment to innovation and security in the rapidly evolving digital payments landscape.
Financially, the company has shown robust performance. In the fourth quarter of fiscal 2024, Visa Inc. (NYSE:V) reported net revenues of $9.6 billion, marking a 12% increase year-over-year. Additionally, GAAP net income rose by 14% to $5.3 billion. This strong performance was driven by increased payment volumes and transactions. Visa Inc. (NYSE:V) also returned significant value to shareholders, repurchasing approximately 62 million shares in its fiscal year 2024 for $16.7 billion, indicating confidence in its financial health.
Additionally, the company has a strong focus on innovation as it aims to expand its capabilities to non-card payments. During its fiscal fourth quarter of 2024, Visa Inc. (NYSE:V) introduced the Visa A2A service, which aims to simplify account-to-account payments, targeting bill payments in the UK with a launch planned for 2025. This initiative reflects Visa Inc.’s (NYSE:V) strategy to diversify its offerings beyond traditional card payments and tap into new revenue streams.
With a strong brand presence and ongoing innovations in payment technology, Visa Inc. (NYSE:V) is well-positioned for future growth. As of the third quarter of 2024, Visa Inc. (NYSE:V) was held by 165 hedge funds, according to Insider Monkey’s database. Mar Vista Investment Partners, LLC stated the following regarding Visa Inc. (NYSE:V) in its “Mar Vista Focus strategy” third quarter 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.”
Overall, V ranks 1st on our list of the best digital currency and payments stocks to invest in. While we acknowledge the potential of V as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. 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.
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Disclosure: None. This article is originally published at Insider Monkey.