Visa (V) has indicated a solid uptick in consumer spending from April to May, as it continues to actively monitor the Covid-19 impact globally.
Most notably, in May, total U.S. payments volume declined 5% year-over-year, a 13 percentage point (ppt) improvement over April. Meanwhile debit grew 12% and credit declined 21% year-over-year in May, a 17 ppt and 9 ppt improvement over April, respectively.
“The continued distribution of Economic Impact Payments and the relaxing of shelter-in-place restrictions in a number of states are driving these trends” Visa stated.
However, recovery in international markets in which Visa processes the majority of transactions lagged the U.S. in May. Across most of Europe, as well as Australia, Canada and Japan, the trajectory so far is comparable to the U.S. India and Singapore are slowly reopening, said Visa, while a few markets, such as New Zealand, Denmark and Chile, have positive year-over-year constant dollar growth in May.
Global processed transactions declined 12% in May, a 12 ppt improvement over April. Since April, the mix has shifted to larger ticket transactions.
Cross-border volumes excluding intra-Europe transactions declined 45% in May, a 6 ppt improvement over April. Travel related cross-border volumes declined 78% in May while cross-border eCommerce (excluding travel) continued to grow strongly, up 18%. Cross-border volumes including intra-Europe transactions declined 35% in May, an 8 ppt improvement over April.
“As we have indicated before, cross-border volumes excluding intra-Europe transactions drive our international transaction revenues” Visa said.
Shares in Visa are currently trading up 3.5% year-to-date, and analysts have a bullish Strong Buy consensus on the stock. In the last three months, 18 analysts have published buy ratings vs 5 hold ratings. Meanwhile the average analyst price target stands at $200 (3% upside potential). (See V stock analysis on TipRanks).
RBC Capital analyst Daniel Perlin recently bumped up his price target from $195 to $212 (9% upside potential). “Overall volume trends point to a path of stabilization, while the shape of the recovery likely to be more elongated. However, new secular opportunities in ecommerce & accelerated cash to electronic conversion points to solid long-term growth.” he explained.
“Our higher valuation is based on our view that V will be able to expand its constituencies, improve its competitive position, and accelerate secular trends as we emerge into a more normalized phase of growth” the analyst added.
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