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Avoid Visa (V) Stock Till Short-Term Hiccups Are Cleared

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On Sep 28, we uploaded our research report on Visa, Inc.V , a leader in global payments.

No doubt Visa remains a leader in the payment processing industry. Yet the earnings of this company will see pressure over the coming quarters from foreign exchange volatility, incentives and rebates and higher expenses.

Currency fluctuation along with higher volume and support incentives passed on to customers and intermediaries might thwart the expected revenue growth. This is also validated by management's estimation of incentives, as a percentage of gross revenues, of about 17.5-18.5% for fiscal 2015, up from 17% in fiscal 2014.

Moreover, Visa faces foreign exchange headwinds. Recently, management raised the foreign exchange headwind to 2.5 points (up from 2 points). Going forward, the company's growth is expected to remain sluggish in comparison to prior years. This is also reflected in its top-line growth guidance of low double digits, excluding a 2.5% reduction due to the negative impact of foreign currency, and bottom-line growth in the mid-teens range in fiscal 2015, lower than 19% growth recorded in fiscal 2014 and 22% in fiscal 2013. Top-line growth also slowed down to 7.5% in the first half of fiscal 2015 and 8.7% in fiscal 2014 from 13% in fiscal 2013.

Visa also faces several state and federal lawsuits on interchange rates' violation, currency conversion practices and pricing structure.

During the last reported quarter, though the company outpaced estimates, much of the upside in the earnings per share was driven by transitory benefits including FX volatility and lower client incentives.

Visa carries a Zacks Rank #4 (Sell). Some better-ranked players in the space are Global Payments Inc. GPN , Total System Services, Inc. TSS and Fiserv Inc: FISV . All these stocks carry a Zacks Rank #2 (Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

VISA INC-A (V): Free Stock Analysis Report

TOTAL SYS SVC (TSS): Free Stock Analysis Report

FISERV INC (FISV): Free Stock Analysis Report

GLOBAL PAYMENTS (GPN): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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