One Wall Street analyst, TD Cowen’s Bryan Bergin, has suggested that investors may be overly worried about impending reductions in credit card interchange rates. Bergin recently started coverage of Visa (NYSE: V) with a buy rating and set a price target of $320.
A reasonable target for the market leader
Bergin’s target suggests a potential 16% increase from the current price over the next 12 months, surpassing many of his peers’ expectations. Considering the robust growth trajectory of the world’s largest global payment network, such a stock price appreciation forecast seems reasonable.
While a recent agreement to reduce U.S. credit card interchange fees for at least 5 years may pose a challenge, the rapid growth of international transactions is expected to offset this headwind. This trend is anticipated to sustain steady earnings growth at a high-single-digit percentage rate through 2030.
In Visa’s fiscal 2024 first quarter, which concluded on Dec. 31, 2023, the company reported a 16% year-over-year increase in cross-border volume, contributing to an 8% rise in adjusted earnings compared to the previous year. Furthermore, share repurchases drove a year-over-year increase of 11% in earnings per share for the fiscal first quarter.
A good stock to buy and hold
Visa has demonstrated an impressive 298% growth in earnings per share over the past decade, with ample room for further expansion thanks to its presence in international markets and the ongoing growth of cross-border transactions. With the stock currently trading at just 27.8 times forward earnings expectations, it presents a reasonable valuation considering its potential to sustain high-single-digit percentage earnings growth over the long term.
Being the largest among only four card-based global payment networks, investors can reasonably anticipate Visa to continue delivering earnings growth for at least another decade.
