Visa (NYSE:V) is quickly earning the reputation as a classic buy-on-the-dip stock. The payment technology company most recognized for their credit cards of the same name is up 8% for the year and over 23% in the last 12 months.
But that’s not telling the full story. If you had bought and held Visa stock five years ago, you would be sitting on gain of over 200%. And that doesn’t take into account the company’s dividend which has increased in each of those five years. That means your total return was even higher.
However, with the card now near its all-time high set early in July, what is the outlook for Visa going forward? I see it several bullish catalysts that should make every dip a buying opportunity.
Earlier this year, Visa’s attempt to acquire Plaid, the U.S. open banking platform was blocked by regulators over concerns that the company would hold a monopoly in the digital debit card space. Undeterred, Visa recently acquired Tink, a European-based open banking platform. The acquisition of Tink will provide Visa with an additional revenue stream.
As the pandemic made very evident, there are millions of individuals who are now doing a significant amount, if not all, of their banking through avenues other than traditional banking. This is being facilitated by the growth of financial technology (I.e. fintech) solutions that make it much easier for companies such as PayPal (NASDAQ:PYPL) to operate like a traditional bank. This is particularly true for small businesses and participants in the gig economy.
Consumers Have Money (and Credit) to Spend
One year ago, Americans were all juiced up with nowhere to go. Direct stimulus payments to millions of Americans combined with a lack of entertainment options put many Americans into savings mode. And that included paying down credit card balances.
This meant that there was a significant amount of dry powder on the sidelines when the economy finally reopened. And in the world of e-commerce, Visa is accepted and welcome. The company’s first quarter results showed an increase in both payments volume and in the number of processed transactions.
That number should only increase as more states have relaxed Covid-19 restrictions. The laggard at this time is cross-border payments. With the uneven international rollout of the vaccine along with increasing concern over the Delta variant, this may remain an obstacle to the company’s growth.
However, overall revenue (and earnings) should continue to build off the first quarter’s strong numbers. And with the company likely to increase its swipe fees in 2022, that will offer even more opportunity for growth.
On the Leading Edge of Crypto Payments
Visa has been accepting crypto payments for some time. However, the company recently announced that over $1 billion of cryptocurrency was purchased through the company’s crypto-linked cards in the first six months of 2021. And Visa executives believe that cryptocurrency could make a significant dent in the $18 trillion that consumers spend every year using cash or checks.
One way that Visa facilitates this growth is by allowing consumers to make transactions in USD Coin. This is what’s known as a stable coin that is powered by the Ethereum blockchain.
And this facilitates cryptocurrency transactions by eliminating the need to convert cryptocurrency into fiat money. Over the next few years, Visa is planning to expand its menu of stable coins. This is welcome news to traditional banks who are exploring adopting their own digital currencies. And that means that Visa will likely be top-of-mind to get this business.
Currently Visa partners with Circle, BlockFi and Coinbase (NASDAQ:COIN) to facilitate cryptocurrency transactions at more than 70 million merchants worldwide.
Buy the Dip and Enjoy the Ride
V stock is forming a bullish ascending pattern of higher highs and higher lows. With support and resistance both increasing, it's not unrealistic to see the stock reach $260, which would be a gain of over 10% from the stock’s current level.