New Trade for February 2nd, 2021

Stocks are higher this morning and seem to be looking for a continuation of yesterday’s upward movement — every major index closed positive yesterday and every sector finished higher.  Let’s see if the momentum will sustain.

One side effect of the pandemic has been an acceleration of the trend towards a cashless society.  Today’s trade alert highlights a firm that stands to benefit as more and more consumers transition from dollars to digits.  A big announcement this morning could mean it won’t be trading at it’s current levels for long.  

Visa Inc. (V) is the world’s second-largest card payment organization after China’s UnionPay. Visa doesn’t issue any credit or debit cards on its own — it merely partners with financial institutions that issue Visa-branded cards, then collects payment processing fees whenever the cards are used.  This business model shields Visa from the risks of unpaid credit card bills and defaults, which are shouldered by the issuing banks.

Visa announced today VisaNet +AI, a suite of AI-powered services that address long-standing challenges and pain points for banks, merchants and consumers — including delays and confusion with managing account balances and the unpredictability of daily settlement for financial institutions.  These innovations harness Visa’s high-performance AI platform to help make payments more predictable, transparent, and speedy.

“Our clients, partners and cardholders look to us for actionable data-driven insights to better manage their businesses and financial lives, especially during these unprecedented times. Today we’re announcing a set of services that use AI to make it easier for consumers to manage their accounts, and for financial institutions to manage their business,” said Jack Forestell, executive vice president and chief product officer, Visa.  “With our investment in AI infrastructure, we’re unlocking novel, real-time solutions to complex problems.  This is just the beginning of what we can do with the predictive power of AI.”

Visa’s presence in over 200 countries and territories make it practically synonymous with credit card payments and the war on cash.  It also benefits from the growth of the mobile payment market, since many of those apps need to be linked to credit card accounts.

Visa’s annual revenue rose from $13.9 billion in 2015 to $21.8 billion in 2020, while its net income jumped from $6.3 billion to $10.9 billion.  Analysts expect Visa’s revenue and earnings to rise 7% and 8%, respectively, in fiscal 2021 before accelerating to double-digit growth rates in 2022 as the pandemic passes.

Visa’s stock has nearly tripled over the past five years, but it still trades at a reasonable 29 times forward earnings — and it could have plenty of room to run as cash gradually vanishes from our daily routines.

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