Dow component Visa Inc. (V) rallied to an all-time high on Monday, underpinned by the repeal of COVID mandates all across the U.S. ‘Red State’ universe. Texas started the ball rolling when Gov. Abbott lifted mask and capacity restrictions, quickly followed by similar pronouncements in Mississippi, Alabama, and West Virginia. Other states run by Republican governors have followed suit or partially lifted restrictions while maintaining mandates that are now widely ignored.
Rapid Economic Expansion
Taken together with the rapid expansion of U.S. vaccinations, the nation appears at the brink of a dramatic economic surge that could take the rest of the world by surprise. The bond market has picked up on this bullish development, lifting yields to multiyear highs. Increased spending will add substantially to Visa revenue, raising odds for a strong uptrend that posts impressive 2021 returns.
The company benefited from the pandemic’s forced change in financial transactions, with contactless payment systems emerging as a major force. However, Visa and rival Mastercard Inc. (MA) revenues are highly levered to payment volume, which fell precipitously in the first quarter of 2020, and has recovered at a measured pace. In reaction, rallies in both stocks faltered after strong bounces, yielding mediocre 2020 returns.
Wall Street and Technical Outlook
Wall Street consensus has lifted to a ‘Buy’ rating based upon 29 ‘Buy’, 4 ‘Overweight’, 6 ‘Hold’, and 1 ‘Underweight’ recommendation. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $216 to a Street-high $270 while the stock is set to open Tuesday’s U.S. session about $4 below the low target. This divergence with price action could underpin a strong multi-month uptrend.
The stock posted exceptionally strong gains between 2017 and the first quarter of 2020, topping out at 214.17. It shed 80 points during the pandemic decline and turned sharply higher, completing a round trip into the prior peak in August. Nominally higher highs since that time have carved rising wedge resistance, which narrowly aligned with Visa’s closing print on Monday. In turn, a rally above the weekly peak at 226.13 is now needed to confirm a breakout and uptrend that could reach 300 later this year.
For a look at all this week’s economic events, check out our economic calendar.
Disclosure: the author held Visa in a family account at the time of publication.