Visa Inc. (V) stock has jumped over the past four months following a brief decline in late February and early March 2020, as part of a broader market drawdown due to the coronavirus pandemic. Despite the pullback, the payment application company has moved up on the WhaleWisdom Heatmap to a ranking of twelve. Hedge funds were actively buying Visa in the first quarter. The stock has closely followed the S&P 500’s performance, rising by approximately 4.4% in comparison to the S&P’s gain of about 4.65%.
Visa is more than just a credit card company and has an intense but complex business model, including a portfolio of payment brands, branded payment product platforms, transaction processing, and debit processing services. Business transactions greatly influence Visa’s performance and individual consumer spending, which understandably were negatively impacted by the pandemic-induced shutdown of businesses, halted travel, and local government stay-at-home orders. While consumers are beginning to again spend on discretionary items, there is new caution as unemployment rates are up, and the pandemic has influenced consumer mindsets to focus more on essential items. Between temporary forced business closures, restricted business re-openings, and changing consumer habits, it has been a bumpy road for companies like Visa to forge ahead.
Varied Results from Hedge Funds and Institutions
Looking at the first quarter activity among hedge funds, Visa saw an increase in its aggregate share value. Total 13F shares held rose to about 583.6 million from 569 million, an increase of approximately 2.6%. Of the hedge funds, 54 created new positions, 169 added to existing holdings, 46 exited, and 212 reduced their stakes. In slight contrast to hedge funds, institutions were selling. Overall, institutions decreased their aggregate holdings by about 2%, to approximately 1.58 billion from 1.61 billion.
Encouraging Multi-year Estimates
Analysts anticipate that earnings per share will initially fall in the fiscal year ending September 2020, but then predict a rise in 2021 and 2022 of approximately 16.5% and 19.8%, respectively. These significant year-over-year estimated increases would bring earnings to $7 per share in 2022, up from $5.02 for 2020.
Additionally, KeyBanc Capital Markets Inc.’s analyst, Josh Beck, has a favorable outlook for the stock and raised the price target to $215 from $190, while maintaining an Overweight rating on shares.
Things are certainly looking up for Visa, and analysts’ multi-year predictions are encouraging. However, while Visa ultimately saw a rebound this year from reduced earnings near the start of the pandemic, the uncertainty as to when the pandemic will end is still a concerning factor. Investors may need patience to see higher stock prices.