Why investors are wary on Visa Inc (NYSE: V) stock

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Visa Inc (NYSE: V) stock fell over 2.5% in this year to date (as of May 11th, 2020; Source: Yahoo Finance). The company gave a bleak full-year outlook due to rising unemployment numbers and more people conserving cash during the COVID-19 pandemic.

Visa Inc. Stock (V)

Visa’s net income grew 4% to $3.08 billion in the second quarter ended March 31 from $2.98 billion a year earlier. The company’s total payments volume grew 5% to $2.14 trillion, on a constant dollar basis, in the second quarter, but was below the 8.2% growth during the corresponding period last year. The retail sales in U.S. has suffered a record drop in March due to the closure of bars, restaurants and non-essential retailers such as clothing stores, outweighing an expected rise in spending on household essentials and at online retailers. Further, about one fourth of the payments volume is in the hardest-hit categories, including travel, fuel, restaurants and entertainment. Cross-border volume has fallen by 2% on a constant dollar basis, and the company processed 34.9 billion transactions on the network, which reflects an increase of 7% over the prior year. At the end of the second quarter, about 60% of face-to-face transactions, excluding the United States, were tap-to-pay, and tap-to-pay transactions posted growth of over 40% year-over-year.

The company had reported the adjusted revenue growth of 7 percent to $5.85 billion in the second quarter of FY 20, beating the analysts’ estimates for revenue of $5.75 billion, according to Refinitiv IBES data. Second quarter service revenues rose 9%, data processing revenues grew 11% on the back of value-added services and acquisition-related revenue. The company has ended the second quarter with $13 billion of cash, cash equivalents and investment securities on hand. Since the end of the quarter, the company has added to the cash balance with the $4 billion debt issuance in April.

Furthermore, the company plans to hold second half expenses flat compared to last year and, excluding acquisitions, the expenses will be down in the low single-digit year-over-year. The company is evaluating additional actions to reduce expenses even further. The company now projects the non-operating expense to be in the $250 million range in the second half, excluding gains and losses, versus $148 million in the first half.

Additionally, in the second quarter, the company had bought back 17.8 million shares for $3.2 billion at an average price of $180.10. The company plans to buyback over $9 billion in stock this fiscal year remains unchanged.

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