Visa's ‘Anemic’ Volume Growth Gets a Close Look From Wall Street

(Bloomberg) -- Visa Inc. shares are little changed pre-market after the company’s second-quarter earnings-per-share beat analyst estimates, but it reported what Bernstein said was surprisingly “anemic” volume growth.

Here’s a sample of what some analysts are saying:

Bernstein, Harshita Rawat

“The biggest surprise in an in-line quarter was the anemic volume growth,” with purchase volumes up about 8 percent year-over-year versus 11 percent last quarter, Rawat wrote in a note. That was the slowest growth in six years, she said. She’ll be closely watching volumes for signs of broad-based weakness over the next few quarters, even as Visa flagged specific causes, including fewer processing days in the U.S., China dual-brand roll-off and Easter timing.

Rawat was “encouraged by the commentary on several strategic areas which are key to sustaining long-term double-digit volume growth,” including a new partnership with Paytm in India, “which appears to have profound implications for the company’s playbook to sustaining (or even accelerating) growth in emerging market countries (the biggest battleground in payments).” She also cited expanding cross-border payments markets.

Rates outperform, PT $175.

KBW, Sanjay Sakhrani

KBW came away from the conference call “feeling positive about the volume growth trajectory heading into the back half of the year,” as factors that hurt this quarter’s growth should dissipate. Sakhrani sees “potential upside from additional pricing actions and initiatives to capture non-traditional payment flows (i.e., Visa Direct, B2B Connect, etc.).”

Outperform, price target $188 from $179.

Citi, Ashwin Shirvaikar

“Visa reported good headline numbers with both revenues and EPS ahead of expectations (including a tax benefit versus expectations and an investment gain),” Shirvaikar wrote in a note.

Comments on the first few weeks of the June quarter suggested an improvement in cross-border growth is sustainable, and the quarter “has started off well, with sequentially better results in general. So, with results indicating known weak areas, better forward commentary and an improvement quarter-to-date, we continue to like Visa.”

Buy, price target $185 from $184.

Morgan Stanley, James Faucette

Visa’s “Long-term growth engines remain solid despite slightly weaker” volumes in the quarter, Faucette wrote in a note. “Visa continues to provide multiple potential upside for top-line growth,” including international partnerships, Tap-to-Pay, India, Visa Direct, and B2B.

Overweight, price target $175 from $173.

Nomura, Bill Carcache

“Relative to last quarter, Visa struck a more positive tone on cross-border volume growth in this quarter’s call, citing stabilization and early signs of improvement,” Carcache wrote in a note. Volume growth trends through April 21 suggest re-acceleration.

“Overall, we walked away from this quarter’s results believing that Visa’s core long-term earnings growth outlook remains solidly intact, and we reiterate our buy rating.”

Price target $178 from $175.

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