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
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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.
The two payment network stocks lag well behind digital payments leaders PayPal (PYPL) and Square (SQ) in the IBD Finance-CreditCard/PaymentProcessing industry group.
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.
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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