Visa stock price has slowly surged to a record high this year as investors wait for its upcoming earnings. V, the biggest financial services company, has soared to a record high of $328, bringing its market cap to over $635 billion. This growth makes it the 15th biggest company in the world.
Visa to release earnings on January 30
Visa has become a dominant player in the financial industry in the last decades as more people embraced credit and debit cards. Its annual revenue has grown from about $21 billion in 2020 to over $35 billion in the last financial year.
This growth happened as the amount of credit card loans and retail spending gained steam in the US and other countries. These events benefit Visa and companies like Mastercard because they are major technology providers.
Visa is a fairly different company than other large giants globally in that it does not make hundreds of billions of dollars in revenue annually. For example, Walmart, which has a bigger valuation, made over $648 billion in the last financial year.
Visa shines in its margins, which are higher than most companies. Walmart’s net income from its $648 billion revenue was $16.7 billion. Visa, on the other hand, had almost $20 billion in net income, which explains its substantial valuation.
Visa has a gross margin of 97% against a net income margin of about 54%. It also has a room to grow its profit margins since its five-year average was over 56%.
The company’s profit margins are because of how it does its business. It simply provides its technology to companies like banks, who use it to issue cards that are accepted globally. Visa provides the technology stack to these firms and then takes a small commission when people spend their cash.
This model means that Visa is never at a financial risk when there is an elevated credit card default rate.
The most recent results showed that Visa’s net revenue rose by 12% in the fourth-quarter to $9.6 billion, while its net income was $5.3 billion. Analysts expect that Visa’s business continued booming in Q1 as its revenue rose by 8.17% to $9.34 billion.
They also expect its forward revenue guidance for this year to be near $40 billion, a 10% increase. Analysts are optimistic that the Visa stock price will rise to $340 from the current $328.
Read more: 3 reasons to buy Visa and Mastercard stocks in 2023
Visa stock price analysis
Visa stock chart by TradingView
The weekly chart shows that the V share price has been in a strong uptrend in the past few months. It has formed a series of higher highs and higher lows, which has resulted into an ascending channel.
The stock has remained above all moving averages and is now at the upper side of this channel. The Relative Strength Index (RSI) has moved close to the overbought level.
Therefore, the stock may suffer a pullback after earnings. Such a drop will see it drop to the next key support at $304. A crash below that level will lead to more downside to the lower side of the channel at $280. A break above the upper
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