Stock of the Day

January 31, 2023

Visa (V)

$348.27
-$2.22 (-0.6%)
Market Cap: $651.13B

About Visa

Visa Inc. operates as a payment technology company in the United States and internationally. The company operates VisaNet, a transaction processing network that enables authorization, clearing, and settlement of payment transactions. It also offers credit, debit, and prepaid card products; tap to pay, tokenization, and click to pay services; Visa Direct, a solution that facilitates the delivery of funds to eligible cards, deposit accounts, and digital wallets; Visa B2B Connect, a multilateral business-to-business cross-border payments network; Visa Cross-Border Solution, a cross-border consumer payments solution; and Visa DPS that provides a range of value-added services, including fraud mitigation, dispute management, data analytics, campaign management, a suite of digital solutions, and contact center services. The company also provides acceptance solutions, which include Cybersource that provides modular and value-added services for connecting merchants to payment processing; risk and identity solutions, such as Visa Advanced Authorization, Visa Secure, Visa Risk and Decision Manager, Visa Consumer Authentication Service, and payment-decisioning solutions for fraud prevention; and Visa Consulting and Analytics, a payment consulting advisory services. It provides its services under the Visa, Visa Electron, Interlink, V PAY, and PLUS brand names. The company serves merchants, financial institutions, and government entities. Visa Inc. was founded in 1958 and is headquartered in San Francisco, California.

Visa Bull Case

Here are some ways that investors could benefit from investing in Visa:

  • Visa has a strong market capitalization of $657.15 billion, indicating its significant presence and stability in the payment technology sector, which can be attractive for long-term investors.
  • The company reported a robust earnings per share (EPS) of $2.75, surpassing analysts' expectations, which reflects its strong financial performance and potential for future growth.
  • With a return on equity of 54.79%, Visa demonstrates effective management of shareholder equity, suggesting that the company is generating substantial profits relative to its equity base.
  • Visa's recent quarterly dividend of $0.59, translating to an annualized dividend yield of 0.67%, provides a steady income stream for investors, making it appealing for those seeking dividend-paying stocks.
  • The current stock price of Visa is favorable for entry, especially considering its consistent performance and growth potential in the evolving digital payment landscape.

Visa Bear Case

Investors should be bearish about investing in Visa for these reasons:

  • Despite its strong performance, Visa operates in a highly competitive market, facing challenges from emerging fintech companies and alternative payment solutions that could impact its market share.
  • The company's price-to-earnings (P/E) ratio of 35.66 may indicate that Visa's stock is overvalued compared to its earnings, which could deter value-focused investors.
  • Visa's debt-to-equity ratio of 0.45, while relatively low, suggests that the company is not heavily leveraged, but any increase in debt could raise concerns about financial stability in a downturn.
  • The price-to-earnings-growth (PEG) ratio of 2.32 indicates that the stock may be priced high relative to its expected growth rate, which could be a red flag for growth investors.
  • Visa's net margin of 54.27% is impressive, but any fluctuations in consumer spending or economic downturns could adversely affect its profitability and margins.

Verizon, Charter Trend Higher In Past Month: Are They Buys Now?

Written By Kate Stalter on 1/31/2023

Verizon, Charter Trend Higher In Past Month: Are They Buys Now?

The communications industry is showing signs of life, as large caps, including Verizon Communications Inc. (NYSE: VZ) and Charter Communications Inc. (NASDAQ: CHTR), are posting strong one-month uptrends. 

The two stocks are components of the Communication Services Select Sector SPDR Fund (NYSEARCA: XLC), which tracks its namesake S&P sector. That ETF has been the biggest gainer on a one-month basis, advancing +13.40%. 

Verizon,  a component of the Dow Jones Industrial Average, as well as being the S&P communications sector’s fourth most heavily weighted stock, is up 4.19% in the past month and 9.85% in the past three months. 

Verizon reported its fourth quarter on January 24, with earnings coming in at  $1.19 a share, down 11% from the year-earlier quarter. Revenue was $35.3 billion, an increase of 3%. 

Those earnings missed analysts’ expectations by a penny while topping revenue views, according to data compiled by MarketBeat.

The company happened to report on a day when a trading interruption caused a temporary halt on the New York Stock Exchange. The NYSE attributed the glitch to “manual error.” 

While it eventually got sorted out, Verizon probably didn’t see exactly the same kind of trading it normally would, in the minutes and hours following an earnings report. Nonetheless, the stock settled 1.99% higher for the session and is up 3.58% in the past week.

For 2023, the company said it expects total wireless service revenue growth ranging from 2.5% to 4.5%. It expects adjusted earnings per share between $4.55 and $4.85.

Disappointing Guidance, But Also Reason For Optimism?

That guidance was disappointing to some analysts, although there was also reason to be optimistic. For example, the company said it expects capital spending to reduce significantly this year, as Verizon reaches the end of its incremental C-band spending. According to Verizon, C-Band technologies significantly expand the availability of higher-performance 5G connectivity. In the earnings conference call, CEO Hans Vestburg said that this reduction in capital spending “will be a tailwind for free cash flow.”

While established large companies like Verizon don’t typically offer the red-hot growth opportunities of younger techs and other growth stocks, at least in a bull market, Verizon’s dividend yield of 6.33% makes it an attractive candidate for investors seeking income. The company has a track record of growing its dividend for 18 years.

Meanwhile, communications industry peer Charter Communications is posting even stronger growth since rallying from a December 19 low. 

The stock had already begun a rally ahead of its fourth-quarter report on January 27. MarketBeat earnings data show net income of $7.69 per share, which missed Wall Street views. Revenue of $13.67 billion also came in below expectations. 

Shares are down 5.82% since the report. 

The company said the number of residential Internet customers increased, albeit at a slower rate than in the year-earlier quarter. The number of residential wireline voice customers decreased at a faster rate. It said during the fourth quarter, it added 615,000 mobile lines, compared to additions of 380,000 in the fourth quarter of 2021. Its Spectrum Mobile service is available to all new and existing Spectrum Internet customers.

Struggling To Gain Traction

Charter has had a difficult time gaining much traction during two separate rally attempts since October, as you can see on its chart. On January 27, shortly after the market opened, Charter briefly passed resistance above $403, but quickly reversed lower. 

You’ll see that the stock is simply moving up, hitting resistance, then trading lower, so there’s not really a discernable pattern at this point. 

With a market capitalization of $64.74 billion, Charter is less than half the size of Verizon, whose market cap stands at $173.24 billion. While Charter is less volatile than the broader market, its recent performance has been more volatile tan Verizon’s. 

At this juncture, while both have notched strong gains, it may be prudent to wait until these stocks stage more substantial rallies before jumping in. Verizon’s dividend status may be a draw for income investors, but the stock performance has a way to go before it’s in buy range.

In addition, investors who own an S&P index fund already have exposure to both Verizon and Charter, so if that’s you, you’re already capturing their performance.

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