Argus Analyst Report Visa.pdf

Argus Analyst Report Visa.pdf - NYSE V VISA INC Report...

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VISA INC NYSE: V ©2018 Argus Research Company Analyst Report Argus Visa Inc. operates the world's largest electronic payments network, providing processing services and payment product platforms, including credit, debit, prepaid and commercial payments under the brands Visa, Visa Electron, Interlink and PLUS. Visa/PLUS is one of the world's largest ATM networks, offering cash access in local currency in more than 200 countries and territories. Analyst's Notes Analysis by Stephen Biggar, October 25, 2018 ARGUS RATING: BUY • Maintaining BUY as strong payment volumes continue • On October 24, Visa reported adjusted EPS of $1.21 for fiscal 4Q18 (ended September 30), up from $0.90 a year earlier and ahead of the $1.20 consensus. Payment volume in 4Q, on a constant-dollar basis, rose 11% year-over-year, while processed transactions rose 12%. • Management offered initial FY19 guidance that included low double-digit revenue growth (with an expected 1% foreign currency headwind) and mid-teens earnings growth on an adjusted basis. • Visa also raised its quarterly dividend by 19% to $0.25 per share, effective with the first quarter of FY19. • Our target of $158 assumes a multiple of 30-times our FY19 EPS estimate, at the high end of the historical range, based on record operating margins in the high 60s. INVESTMENT THESIS We are maintaining our BUY rating on Visa Inc. (NYSE: V) following fiscal 4Q18 earnings that came in slightly above consensus. Our target price remains $158. We are boosting our FY19 EPS forecast based on continued strong payment volumes. We expect several factors to impact Visa's revenue profile. We look for cross-border fees to increase, driven by renewed currency volatility. We believe that tailwinds for Visa are both cyclical and structural in nature, and include improving economic conditions, which should boost payment volumes, as well as the continued transition from cash to plastic for convenience, safety and rewards program benefits. We also note that the market for payment processors is far from saturated given that more than 80% of the world's retail transactions are still done with cash and checks. We expect Visa's core earnings to grow 15% annually over the next two fiscal years. Even in the absence of P/E multiple expansion, we believe that Visa shares are a compelling investment. Our target assumes a multiple of 30-times our FY19 EPS estimate, at the high end of the historical range, based on record operating margins in the high 60s. RECENT DEVELOPMENTS Market Data Pricing reflects previous trading week's closing price. 200-Day Moving Average Price ($) 80 100 120 140 Closed at $140.08 on 10/19 52 Week Low: $132.26 52 Week High: $151.56 Target Price: $158.00 Rating EPS ($) 0.86 Quarterly Annual 0.86 0.86 0.90 3.48 1.08 1.12 1.21 1.21 4.61 1.25 1.30 1.35 1.40 ( Estimate) 5.30 1.44 1.49 1.55 1.60 ( Estimate) 6.08 4.5 Quarterly Annual 4.5 5.0 4.9 18.8 4.9 5.1 5.2 5.4 20.6 5.5 5.6 5.7 5.9 ( Estimate) 22.6 6.1 6.2 6.4 6.5 ( Estimate) 25.3 Revenue ($ in Bil.) FY ends Sept 30 Q1 Q2 Q3 Q4 Q1 2017 Q2 Q3 Q4 Q1 2018 Q2 Q3 Q4 Q1 2019 Q2 Q3 Q4 2020 BUY HOLD SELL Argus Recommendations Twelve Month Rating SELL HOLD BUY Five Year Rating SELL HOLD BUY Sector Rating Under Weight Market Weight Over Weight
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