As it went public in 2008, payment processing giant Visa (NYSE:V) has given returns which were nothing short of outstanding. The stock’s price has climbed by 1,280% in the approximately 12 years because going public, also such as dividends the entire return jumps to 1,400%. It is reasonable to state that Visa has made any concessions from its ancient shareholders.
Even though the functionality so far has been phenomenal, there is a solid case to be made which Visa could be a wise expansion investment to have for another 12 decades — and past.
Picture source: Getty Images.
What’s fueled Visa’s awesome returns?
To make a long story short, Visa has been a massive beneficiary of this tendency toward cashless payments, also called the “war on cash.” Just take a look at how Visa’s business has grown over its time as a publicly traded company:
2007 Fiscal Year
2019 Fiscal Year
Data source: Visa earnings releases.
Let that sink in for a second. There are nearly 2 billion more Visa-branded debit and credit cards in existence than there were 12 years ago. Payment volume through Visa’s network has nearly quadrupled and revenue has grown by 343%. That’s why Visa’s stock has performed so well.
The shift toward a cashless society has accelerated in the past decade or so. Technological innovations from fintech companies like Square (NYSE: SQ) have made credit card acceptance much more common among businesses large and small. Meanwhile, cash has become less convenient to obtain and use in many situations.
Is it too late to get in Visa?
While the COVID-19 pandemic has clearly not been kind to most stocks — especially those that rely on the ability and willingness to spend money, like Visa — the firm’s growth story could still be in its middle innings.
There’s still plenty of cash usage taking place, particularly in international markets. It has been estimated that as many as 80% of payment transactions worldwide still take place in cash. We tend to think of credit card acceptance as a near-universal thing (and in the United States, it largely is), but that’s simply not the case around the world. In fact, Visa is in the early stages of developing its presence in some of the most populated areas of the world.
Plus, Visa is currently focused on the credit and debit card portions of the payments industry, but there are several other parts — particularly person-to-person payments — that it could leverage its massive network on.
Don’t expect a 10-bagger, but that doesn’t mean it’s too late
It’s true Visa isn’t likely to replicate the performance of its first 12 years as a public company over its next 12. It’s simply getting too big — another 10-bagger return would make Visa a $4.2 trillion company.
Having said that, don’t make the mistake of thinking you’re too late to put your money to work in Visa. The company estimates the worldwide payments market at $185 trillion in size, and Visa’s current annualized (pre-pandemic) payment quantity translates into less than 5% of this amount. So, while it isn’t realistic to expect Visa to replicate its massive gains of the last, there’s no reason the business can’t continue to produce marketplace-beating results for a long time to come.