Dow component Visa Inc. (V) is trading just five points below April’s all-time high after bullish Credit Suisse commentary. The financial giant has risen about 7% so far in 2021 but could add substantially to those gains as international locations get vaccinated and open their borders to travelers. U.S. citizens alone could add significantly to payment volumes, with baby boomer accounts stuffed with discretionary capital earmarked for foreign destinations.
Slow International Recovery
The stock had a mixed 2020, booking an 11.7% return, but added just four points to the February 2020 peak by year’s end. It benefited from the rapid transition out of paper currency and into digital assets when the pandemic struck but transaction volumes still haven’t returned to 2019 levels. Americans are doing their part, with 2021 GDP surging above 6%, but the slow recovery in Europe and parts of Asia continue to weigh on investor sentiment.
Credit Suisse analyst Moshe Orenbuch raised his target to $285 on Tuesday, noting “Visa provided updated business metrics through May 31st, highlighted by cross-border ex-intra Europe improving to 85% of 2019 levels in May. This 600bps improvement compares to a guide that implies only 200-300bps of improvement for the entire quarter. In our view, Visa’s cross-border recovery highlights our stance that cross-border revenue can begin to surpass 2019 levels far before we reach a full recovery in travel.”
Wall Street and Technical Outlook
Wall Street consensus rates Visa as a ‘Buy’ based upon 28 ‘Buy’, 6 ‘Overweight’, 4 ‘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 $238 to a Street-high $297 while the stock opened Wednesday’s session about $6 below the low target. This depressed placement suggests major upside but solid metrics will be needed to overcome investor caution.
A strong uptrend topped out near 215 in February 2020, giving way to a steep slide, followed by a vertical recovery wave that stalled in September after completing a 100% retracement into the first quarter peak. Visa has spent the rest of the year and first two quarters of 2021 grinding sideways to higher in a shallow trajectory. Weak accumulation since November 2020 highlights investor caution that should dissipate once enough jabs hit European and Asian arms.
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Disclosure: the author held Visa in a family account at the time of publication.