IBD Stock Analysis
- Clears 217.75 buy point from flat base.
- Lagging RS line is a concern.
- Archrival Mastercard clears early buy point.
Industry Group Ranking
* Not real-time data. All data shown was captured at
2:42PM EST on
Visa (V) is the IBD Stock Of The Day as the payment facilitator stands to benefit from new fiscal stimulus in the near term and a vaccine-enabled recovery through 2021. Visa stock broke above a buy point to hit an all-time high in Wednesday’s stock market action.
Yet Wells Fargo analyst Donald Fandetti dubbed Visa stock and Mastercard “stealthy Covid recovery plays” last month, and the latest stock action supports his thesis.
Here’s the logic: PayPal and Square both saw sales accelerate as the coronavirus pandemic sparked a surge in business moving online. Yet the launch of vaccines should spur a rotation from pure-play e-commerce payment stocks, Fandetti wrote.
What makes Mastercard and Visa stock somewhat “stealthy” recovery plays is that they also benefit from the pandemic shift away from cash. Yet that long-term trend was swamped by 2020’s short-term economic crash and the persistent hit to international travel. As those negatives unwind through 2021, the positive post-Covid outlook for Visa and Mastercard should shine through.
Visa Stock Chart Analysis
Visa stock on Wednesday rose 1.9% to 218.36, clearing a 217.75 buy point from a flat base. That flat base could be seen as a handle to a consolidation going back to early September. Visa stock hit 220.39 intraday.
Visa stock has rallied about 5% this week, likely sparked by President Donald Trump’s Sunday decision to sign the $900 billion stimulus and $1.4 trillion government spending bill.
Wednesday’s advance carried Visa stock past its prior high of 217.65 on Nov. 9. Visa stock jumped 7.2% that day as Pfizer announced its vaccine was 90% effective, a strong sign that the global economy would normalize in 2021.
Visa stock also perked above a down-sloping trend line on Dec 24, offering an early entry point.
Meanwhile, Mastercard rose 2.6% to 355.55, clearing a 348.09 early entry point, while also breaking above a trend line. MA stock has an official buy point of 367.35. However, 357.10 is another early entry that could be viewed as handle.
Visa Stock Lagging
Despite hitting a record high Wednesday, Visa stock has been a laggard during the pandemic. Its relative strength line, which tracks a stock’s performance vs. the S&P 500, was near a 19-month low before this week’s rally. Mastercard stock has shown similar mildly lagging action in 2020.
Visa stock has a mediocre 63 IBD Composite Rating, with 99 the top rating. The Composite Rating combines several key fundamental and technical factors into a single score. IBD research shows all-time stock winners often have a Composite Rating of at least 95 near the start of big runs.
Yet fundamentals are set to improve as the pandemic wanes. Visa earnings per share fell 7% to $5.04 in this fiscal year ended September, with 23% declines in fiscal Q3 and Q4. But analysts see EPS growing 8% to a record $5.44 in fiscal 2021 and 24% to $6.75 in 2022, according to Zacks Investment Research.
Visa Growth Opportunities
At a Dec. 2 Credit Suisse technology investor presentation, Visa CFO Vasant Prabhu touted “massive opportunities” for growth. He highlighted digital wallets for the unbanked in emerging markets, person-to-person payments via Visa Direct, and business-to-business payments.
“Our payment volume across the network is about $8 trillion to date,” Prabhu said. “There’s $18 trillion in cash still left that has even gone up in the last four years even though we’ve digitized a lot of cash. So that gives you a sense of how much more is left. And out of that $18 trillion, $8 trillion, or almost as much as what we have today globally, is in the developed markets.”
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