Visa has a tremendous opportunity to replace the current practice of checks and cash with digital payments, as only about 15% of global payments currently take place digitally
Pacific Crest has reaffirmed its Overweight rating of Visa stock and assigned $76 of price target in a sell-side report. The report suggests that forex headwinds can continue to be an impeding factor with an increasing dollar. However, there is a hope of a secular shift to digital payments, which might help strengthen underlying growth, in spite of macroeconomic sloth.
The report suggests the sluggishness in Chinese economy growth, but restraints that it’s too timely to mention that there might be a large impact on outbound travel, which is an important volume contributor, particularly in emerging countries with increasing prosperous populations. The increase in mid class demographics in countries like Latin America, China, India, and some countries in Africa is providing a motivation to the payment digitalization and its growth, and in result impacting business of Visa Inc.
According to the reports, there is a great opportunity to substitute the current practice of cash and checks with digital payments. Around only 15% of worldwide payments currently happens digitally, with approximately $8 trillion transaction expected to be included to digital payment volume by the end of 2020.
The financial service company has an extended portfolio containing products such as Visa ready, Visa Checkouts, Visa offers, and many more. According to the report, on the regulatory front, the emphasize is expected to move to Europe from United States at present, where services of visa have comparatively less dispersion.
Pacific Crest’s stock target price of $76 is on the basis of 25x price to earnings multiple for the earnings per share estimate for fiscal year 2016. As per the report, the primary risk that might delay the hike towards the target price involve adverse regulatory results, particularly in the core United States, reputation damage of brand, and a macroeconomic slowdown across the globe.
According to the data available on Bloomberg terminal, the Visa stock analysis has been covered by almost 41 analysts, out of which 31 have given a Buy rating, 10 have recommended a rating of Buy, while no one assigned a Sell rating. The twelve month average price target stands at $81.12, which shows a 13.6% upside potential compared to current closing price of $72.44.
The company has a great opportunity to replace its present practice to digital payments, as nearly 15% of international payments occur digitally.
Visa stock price was up 0.06% at $72.44 at market close on Friday August 28.
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