Cutting Through Noise, the Trend Is Positive for Visa

There was significant noise in wide-moat Visa's VISA fiscal second-quarter results, given that the company partially lapped the onset of the COVID-19 pandemic, including some one-time charges. However, stripping that out, the overall trends for the business look steady, with growth continuing to improve as the impact of the pandemic starts to recede. We will maintain our $194 per share fair value estimate.

Reported net revenue fell 2% year over year, or 3% on a constant-currency basis, an improvement from the 6% decline in the first quarter. Processed transactions in the quarter were up 8% year over year. Visa reports a portion of its revenue with a one-quarter lag, and management said that if reported revenue was completely based on current volume, it would have been flat during the second quarter.

Year-over-year comparisons are also somewhat difficult for the March quarter, given that Visa started to lap the start of the pandemic toward the end of the quarter. However, the company provided monthly numbers indexed to 2019 levels, and based on these figures, transaction growth appears to have weakened a bit in February because of severe weather but then returned to the trend line of modest improvement in March and April. Overall, we think that the results reported for the March quarter support the idea that volumes are gradually returning to normal.

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