Amplified innovation lowers disintermediation risk of the global payments technology company, analysts said.
"We are more constructive on Visa's innovation strategy, which could boost transaction growth, generate new value-added services, and reduce disintermediation risk," analysts said, adding, "We think Visa is the best-positioned mega-cap payments name and are raising our multiple to 25x."
Shares of Visa are up 0.4% to $251.92 in pre-market trading.
Separately, TheStreet Ratings team rates VISA INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate VISA INC (V) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, notable return on equity and solid stock price performance. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 6.8%. Since the same quarter one year prior, revenues slightly increased by 8.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- V has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.35, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for VISA INC is rather high; currently it is at 65.56%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 33.23% significantly outperformed against the industry average.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the IT Services industry and the overall market on the basis of return on equity, VISA INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Compared to its closing price of one year ago, V's share price has jumped by 25.66%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- You can view the full analysis from the report here: V Ratings Report