Visa, the world’s largest payment processor, posted a 20% increase in earnings for its fiscal third quarter. While revenue was up 10%, it fell short of analysts’ estimates, causing the stock to drop 3% on Wednesday. But should you take advantage of this dip and buy Visa stock?
Visa generated $8.9 billion in revenue, a 10% increase year-over-year, but missed estimates by a small margin. Net income rose 17% to $4.9 billion, and earnings per share jumped 20% to $2.40, in line with expectations.
Despite the mixed results, Visa’s stock price fell 3.7% on Wednesday to $255 per share, bringing its year-to-date decline to 2.3%. However, this rare revenue miss for Visa may present a buying opportunity for investors.
A Rare Revenue Miss
Visa’s revenue miss was a rare event, with the last one occurring in 2020. The disappointment stemmed from lower-than-expected payment volume, which increased 7% year-over-year. The slowdown in spending by lower-income consumers may be attributed to higher credit card rates.
On the bright side, cross-border volume rose by 14%, and processed transactions increased by 10%, indicating strong growth in other areas for Visa.
Lower Interest Rates Should Help
Visa maintained its revenue growth guidance for the full fiscal year, expecting low double-digit growth. A possible decrease in interest rates by the Federal Reserve could boost consumer spending and payment volume for Visa.
Should You Buy the Dip?
Despite Wall Street analysts lowering their price targets for Visa, most maintained buy ratings with a median target of $310 per share, a 21% increase from the current price. With Visa’s historical consistency in growth and current valuation, now might be a good time to consider buying Visa stock.
Today’s selloff was more about overvalued tech stocks than Visa’s performance, making it a solid buying opportunity for investors.
Overall, Visa’s earnings report showed strong growth, despite missing revenue estimates. Investors should consider the long-term potential of Visa’s business model and market position before making any investment decisions.