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Oct 25, 2019

Visa joins PayPal with 'better than feared' results: Analysts say

Visa, Intel higher on earnings reports

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Shares of Visa Inc. slipped 0.1 per cent in pre-market trading on Friday, paring earlier gains, after the company reported earnings and issued forecasts that were better than expected. Analysts used the same phrase — “better than feared” — to describe Visa’s results as they’d used to characterize a report by fellow payments company PayPal Holdings Inc. on Thursday.

Visa stock rose the most since Feb. 1 on Thursday to close 2.8 per cent higher, while PayPal’s closed up 8.6 per cent at the highest since Sept. 23. Visa and Mastercard Inc. have outperformed so far this year, with Visa rallying 34 per cent and Mastercard gaining 43 per cent. That compares with a 25-per-cent gain for PayPal, and a 20-per-cent rise in the S&P 500.

Here’s a sample of the latest commentary:

Morgan Stanley, James Faucette

Visa makes “compounding earnings growth look easy,” Faucette wrote in a note, as it delivered “another quarter of strong double digitrevenue/earnings growth, with 2020 guidance implying more of the same.”

Faucette said that investors are “likely to be positively surprised by slightly better cross border and international growth.” He’s “encouraged by progress in longer-term opportunities.” Maintained overweight rating, lifted price target to US$207 as valuation was rolled forward to 2021.

MoffettNathanson, Lisa Ellis

“Visa’s results were about as in line as they could be, which for Visa means really good,” Ellis wrote. She flagged fiscal 2019 revenue growth of 11 per cent and earnings per share growth of 18 per cent, along with forecasts pointing to “more of the same” in 2020.

She added that Visa’s “core volume metrics were in-line, if still a bit sluggish.” And most of the call was spent, as usual, she said, on “strategic topics, with a particular focus on Visa’s new offerings.” Rates Visa buy, with a target price of US$210.

Bernstein, Harshita Rawat

“We remain bullish and view Visa (and Mastercard) as a ‘clean’ secular growth story in payments,” Rawat wrote. “Despite investor concerns, macro appears largely stable, and Visa (and Mastercard’s) earnings are somewhat resilient even in a downturn,” while there’s probably upside from compounding earnings-per-share growth.

In the quarter, results were largely in line with expectations when adjusted for non-operational items, including accounting, taxes and interest expense, Rawat said. Revenue was also in line when adjusted for accounting, as “modest weakness” in services and other revenue was offset by lower incentives, stronger international transactions, and data processing revenue.

Visa’s 2020 forecast was “modestly ahead of buy-side expectations,” she added, noting that the outlook was a key investor focus going into the results as “many investors were cautious on macro and lapping of a strong pricing year.” Rates outperform, price target US$200.

Jefferies, Trevor Williams

Visa’s earning-per-share beat was driven by “top-line upside and a lower tax rate,” Williams wrote. Initial 2020 guidance was in-line with Jefferies expectations, and may have been “better than some feared.”

“We continue to like the near-term set-up with a 10-per-cent-plus discount to Mastercard despite EPS growth converging, full pricing impact in the first half of 2020, FX headwinds easing, and believe Visa Direct can drive upside,” he said.

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