On Wednesday, financial services company Visa Inc . (NYSE:V) received a positive outlook from Compass Point, as the firm initiated coverage on the stock with a Buy rating and set a price target of $319.00. The new target reflects an 18.5% potential upside from Visa's current trading level, alongside an anticipated total return of approximately 20%.
The coverage initiation is based on a price-to-earnings (P/E) next twelve months (NTM) multiple of 28.6 times Compass Point's forecast for Visa's fiscal year 2025 earnings per share (EPS) of $11.16. This EPS estimate is slightly above the consensus, with Compass Point expecting a 1.2% higher "core" EPS for the fiscal year 2025.
Compass Point's optimistic stance on Visa is partly due to their analysis of the company's value-added services (VAS). According to their projections, Visa's total net revenue in the long term (LT) could see a 15% increase as a result of deeper penetration of these services.
The firm's analysis suggests that Visa's revenue growth will outpace the market's expectations, driven by the company's strategic focus on expanding its value-added offerings. This expansion is anticipated to contribute significantly to the company's overall financial performance in the coming years.
In other recent news, Visa has been a subject of several developments. The Reserve Bank of India (RBI) imposed a fine of nearly $288,000 on Visa for implementing an unauthorized payment transfer method. The company acknowledged the order and expressed commitment to adhering to RBI's guidelines and regulations.
In a separate incident, Argus revised its outlook on Visa, reducing the stock's price target to $295.00 from the previous $310.00, while maintaining a buy rating. The revision was due to a deceleration in payment volumes, despite Visa's consistent performance.
In the financial front, Visa's adjusted earnings per share (EPS) for the third fiscal quarter of 2024 were reported at $2.42, a rise from $2.16 in the same period the previous year. The company experienced a 7% increase in payment volume during the third quarter. Visa's management has reconfirmed its full-year 2024 guidance, which anticipates low double-digit revenue growth and an increase in EPS in the low teens.
Lastly, the Paris Olympics have positively impacted the French economy, with Visa reporting a 26% increase in sales to cardholders during the opening weekend of the games compared to the same period last year.
InvestingPro Insights
Visa Inc. (NYSE:V) has demonstrated a commendable track record with a dividend that has been raised for 16 consecutive years, reflecting the company's commitment to returning value to shareholders. Additionally, Visa's cash flows have been robust enough to comfortably cover interest payments, an indicator of financial resilience and stability. These attributes underscore Visa's role as a prominent player in the Financial Services industry.
In terms of valuation, Visa is currently trading at a high Price / Earnings (P/E) ratio of 29.69, which is slightly above the adjusted P/E ratio for the last twelve months as of Q3 2024, standing at 27.47. This valuation metric suggests a premium relative to near-term earnings growth. Moreover, the company's Price / Book multiple for the same period is 13.83, pointing to a high valuation in terms of book value. Despite this, analysts remain optimistic, predicting profitability for the year, supported by a solid gross profit margin of 97.8% over the last twelve months.
For investors seeking additional insights, InvestingPro offers more tips on Visa Inc., providing a comprehensive analysis that could further inform investment decisions. Visit https://www.investing.com/pro/V for a deeper dive into Visa's financials and market performance.
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