"Visa, Digital Payment Growth Trend... Long-Term Growth Expectations Remain Valid"

[Asia Economy Reporter Eunmo Koo] Visa, a leading U.S. card network company, posted results for the second quarter of fiscal year 2020 (January to March) that exceeded market expectations. Although the impact of the novel coronavirus disease (COVID-19) is inevitable in the short term, the increase in digital payments suggests that long-term growth prospects remain valid.

According to Hanwha Investment & Securities on the 9th, Visa's revenue for the second quarter of fiscal year 2020 increased by 6.6% year-on-year to $5.85 billion. Non-GAAP operating income rose by 7.9% to $3.94 billion, and adjusted earnings per share (EPS) increased by 5.3% to $1.38, all surpassing expectations.

Due to the COVID-19 outbreak, payment volumes sharply declined in the Asia-Pacific region in February and in North America and Europe from mid-March onward. However, the overall payment volume growth in January and February offset this decline, resulting in a total payment volume of $2.8 trillion for January to March, a 0.9% increase compared to the same period last year.

By region, payment volumes in the Asia-Pacific and Latin America regions decreased year-on-year, but payment volumes and transaction counts in Eastern Europe, the Middle East, Africa, and North America all increased compared to the same period last year.

While the impact of COVID-19 is expected to be unavoidable in the short term, the company is still regarded as one with promising long-term prospects. On the same day, Bo-won Choi, a researcher at Hanwha Investment & Securities, stated in a report, “Visa is expected to see a decline in transaction volumes reflected in service revenues through the third quarter (April to June) of this year due to COVID-19, and since the timing of consumer recovery varies by country, short-term top-line growth may be limited.”

However, he emphasized the importance of noting that “after lockdowns in major countries, contactless payment methods such as Visa’s ‘Tap to Pay’ service have increased in North America, Europe, the Middle East, and Africa, and partnerships for the ‘Visa Direct’ service are expanding rapidly, leading to swift changes in payment patterns.”

Researcher Choi explained, “In the long term, expectations for top-line growth remain high due to increases in contactless and cashless payments, the introduction of new services and expansion of service regions, partnerships with leading financial and non-financial companies, and network expansion through mergers and acquisitions (M&A).”

Valuation (stock price relative to earnings) is also considered reasonable. Visa’s 12-month forward price-to-earnings ratio (PER) stands at 32.1 times, which is higher than the global payment industry average of 29.8 times but lower than the North American average of 34.6 times and Mastercard’s 37.3 times.

This content was produced with the assistance of AI translation services.