💳 Visa: License To Shop?

The unstoppable GameStop, McDonald disappoints, and WeWork SPAC

Hey Global Investor, here’s what you need to know before the US markets open.

Market Snapshot 📈

S&P 500 (Yesterday’s Close) 3,787.38 +36.61 (0.98%)

NASDAQ (Yesterday’s Close) 13,337.16 +66.56 (0.50%)

FTSE 100 (5 PM IST) 6436.16 -89.99 (-1.37%)

NIFTY 50 (Today’s Close) 13,634.60 −182.95 (1.32%)

USDINR (5 PM IST) 72.93 (1 Year +2.28%)

🔥 Top Movers

AFG +17.85%
LGND +17.58%
STPK +15.64%

GME -44.29%
BB -41.63%
BBBY -36.40%

💳 Visa: License To Shop?

Visa Inc. is synonymous with people living a normal life – spending money on entertainment, traveling, eating out, and purchasing online and offline. Its business trajectory over the past year reflects the reality of the global response to Covid – the world in a lockdown a few months back and now, the slow emergence from those dark days.

Background: Whenever someone uses their Visa credit/debit card for any purchase, the funds from the consumer’s bank account get routed to the merchant’s bank account through the Visa network. For facilitating these transactions, Visa charges a small fee. And it’s these small drops that make the ocean that is Visa, the California-based payments processor, that also happens to be the largest in the world.

As such, with the lockdown in full swing and global travel essentially down to a trickle for the better part of 2020, Visa was in the doldrums. Just when things seemed dire, hope sprang forth in the form of the Holiday Season. With almost everything shifting online including gift purchases and holiday shopping, there was a recovery of sorts in payment volumes overall.

Add to it, the stimulus checks that consumers received from Uncle Sam which they used for holiday shopping. Add all this together and it turns out US holiday sales jumped 8.5% in 2020 – the best growth in over 19 years.

What is Happening? While the analysts were expecting an underwhelming performance from Visa, the actual outcome was not as bad as they had assumed it would be.

Consider this: for Visa’s fiscal Q1, total consumer spending rose 5% Y-o-Y compared to a 10% drop in the prior quarter.

Or this: In Q1, cross-border transaction volume was down 21% Y-o-Y. But before you wonder why that’s good news, do absorb the fact that that’s an improvement from the 47% crash from the prior quarter!

So how did things stack up?

  • Revenue: Revenue: $5.68B, a drop of 6.06% Y-o-Y (compared to the consensus estimate of $5.53B)
  • EPS: $1.42, a drop of 2.74% Y-o-Y (compared to the consensus estimate of $1.28)

And what’s more, the company is setting aside $8B for stock repurchase, so good news all around. However, Visa refrained from providing any guidance on either revenue or earnings for the next quarter citing business uncertainty even as the world inches towards a semblance of normalcy. CEO Alfred Kelly stated that business travel may take years to come back to pre-pandemic levels. So exactly how far away are we from a full recovery? Not in the next few months seems to be a reasonable answer.

Market Reaction: V closed the day up 1.67% at $198.22, and is down 0.11% before hours.

Company Snapshot 📈

$198.22 +3.25 (+1.67%)

Analyst Rating  (36 Ratings) BUY 81%  HOLD 17%  SELL 3%

Newsworthy 📰

  • Going With the Trend: Robinhood raises $1 billion and taps credit lines to make trading of GameStop available to customers (GME -44.29%)
  • Small Mac: McDonald’s falls after global comparable sales stay negative (MCD -0.47%)
  • We Move!: WeWork is in talks to go public through a SPAC deal

Later Today 🕒

  • Before Market Open: Philips 66 Earnings (PSX)
  • Before Market Open: Eli Lily and Co Earnings (LLY)
  • Before Market Open: Booz Allen Hamilton Holding Corp Earnings (BAH)

Fun Fact of The Day 🌞

The sensation of falling when half asleep and jerking yourself awake is called ‘hypnic jerks’

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