) recently reported its fiscal Q2 2011 earnings and posted net
operating revenue of $2.2 billion, an increase of 14% from $1.9
billion in the same period last year. Growth in revenues were
driven by growth in payment volumes, international transaction
volumes and the number of processed transactions. Below we look at
the factors behind the growth in number of processed transactions.
Visa competes with other card networks like MasterCard (
), Discover (
We have price estimate of
$86.09 on Visa's stock
which is about 8-9% above the current market price.
Strong Growth in Number of Transactions
The number of transactions processed by Visa in Q2 2011 grew by
13% to 12 billion from 10.6 billion in the same period last year.
The growth in the number of processed transactions is a result of
the continued shift to electronic payments globally. Also the
acquisition of CyberSource delivered a 38% growth in transactions
from 738 million in Q2 2010 to just over 1 billion in Q2 2011.
The eCommerce growth in the U.S. and abroad remains strong and
is driving transaction volumes higher for Visa.
We expect the number of transactions processed by Visa to
increase from over 47 billion in 2010 to about 87 billion in 2017.
Visa has taken a couple of new business development initiatives,
which will help it to boost its processed transactions.
Some of these are:
- Visa signed a multi-year deal with the State Bank of India to
issue Visa debit products across the SBI franchise. Nearly
500,000 Visa cards have been issued since March 2011 and the
company expects several million to be issued within the first
year of the program.
- In the Latin America and Caribbean region, the company signed
a multi-year credit and debit agreement with HSBC which will
broaden its foothold in this part of the world.
- Value added services such as Visa's real time messaging
service and CyberSource's enhanced decision manager will
encourage merchants to route transactions over Visa Net.
See our full analysis of Visa here.