There is something inherently attractive about buying a stock and holding it for a long time. Stable don’t just have strong balance sheets that can weather rough markets but they often pay dividends, which account for as much as 95% of total returns over the past century according to research by Wharton Professor Jeremy Siegel.
Visa Inc. (NYSE:V) is one stock that has been a long-term holding for many investors, most notably Warren Buffett’s Berkshire Hathaway. The stock is unsurprisingly also a long-term performer. Over the past five years, the share price has gained 67%, and over the past year, it is up by more than 25%. While these are not really skyrocketing AI-like gains, they are very respectable for such a long-established firm.
The question now is whether all the upside catalysts have been tapped out or is there more fuel In the Visa fire ready to power the stock higher over the long term?
Key Points
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Visa’s revenue grew 10% with a 16% rise in cross-border volume and 14% EPS growth, exceeding expectations.
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Despite competition from digital wallets and BNPL, Gen Z’s rising credit card adoption and $3.63T in 2024 transaction values are tailwinds.
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AI-driven fraud protection, partnerships like Elon Musk’s digital wallet, and inflation-driven revenue growth reinforce Visa’s long-term strength.
Credit Cards Win as Cash Transactions Plummet
When was the last time you used cash for your payment? This question is becoming a reality for a lot of people as cashless transactions have grown astronomically – take China for example where cash is virtually non-existent in the big cities.
Credit cards are the foundation that make the cashless society possible but they’re not without their own competitors. Buy now pay later is creeping up and posing a legitimate threat. There are two facets to this: firstly, credit cards are expected to remain the preferred method of payment for in-store retail purchases for 3 out of 10 U.S. consumers by 2027.
If that comes to fruition, it represents a nine-percentage point decline in four years. Next, credit card usage in e-commerce is also expected to lose its leading position as digital wallets are set to account for more than 50% of the share by 2027.
Still, there is a tailwind that might prove to be helpful for the credit card industry, which comes in the form of a generational preference. The Gen Z population is becoming part of the workforce and is spending more on credit cards.
TransUnion reported that Gen Z customers are tapping into credit cards at a much higher rate than their Millennial counterparts. The report found that 84% of credit-active Gen Z consumers had at least one credit card as of Q4 of 2023, while only 61% of credit-active millennials had at least 1 card a decade ago.
The takeaway is that the credit card market is holding up strong on its own for now and that’s also evidenced by total credit card transaction values hitting $3.63 trillion in 2024, jumping by 4.6% from the prior year. There are also expected to be some improvements this year when it comes to delinquency.
Tapping Into Visa…
Visa launched its first card (under its previous BankAmericard name) in 1958 with a revolving credit feature. Since then, it has been onward and upward for the company. Now, its services are present in more than 200 countries and territories. As per the last reported metrics, the company has made 310.4 billion total transactions, with $15.9 trillion in total volume.
In its credit card industry, Visa shares its market-leading position with some notable names. Two needs to be highlighted: American Express Company (NYSE:AXP) and Mastercard Incorporated (NYSE:MA). Amex actually lends out capital while Visa and Mastercard are only credit card processors, but the latter two have a greater reach than Amex. Visa and Mastercard are major players, with a joint market share of 76.5% in the U.S. card network volume.
How Are Visa’s Financials Holding Up?
Visa management reported first quarterly results for fiscal 2025 (the quarter that ended December 31, 2024) and largely the results were positive. Fears of an economic downturn increasingly receded and consumers were encouraged to spend due to discounts during the holiday season. As a result, payment volume leapt by 9% from the prior year’s period.
The company posted a 10% growth in its top line as a result of this, reaching $9.51 billion during the quarter. This figure was actually better than what the Wall Street analysts were expecting. There were also some tailwinds due to the still-rebounding travel demand, as its cross-border volume increased by 16% from its year-ago value.
The bottom line financials also reaped gains as a result of sales successes. Earnings per share on a non-GAAP basis came in at $2.75, which was 14% greater than what it was a year ago. This was also better than what the market was expecting out of Visa.
Is Visa a Long-term Buy Now?
Visa remains a long-term buy and a staple in Berkshire Hathaway’s portfolio but is closing in on analysts consensus price target of $373.39 per share.
The forecast for consumer spending is good for now, which bodes well for Visa. And another growth lever stems, perhaps surprisingly, from artificial intelligence. For example, in December last year, Visa completed the acquisition of an AI-based payments protection tech platform called Featurespace. The company also partnered with Elon Musk to launch a digital wallet.
The bottom line is there’s lots to like about Visa. As inflation takes hold, Visa benefits from merchants charging higher prices because its fixed percentage fees still translate to higher revenues. And as long as people are spending, Visa enjoys the largest network to capture a small percent of the bulk of transactions. That’s a hard company to bet against over the long haul.