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Visa is very much in demand as consumer confidence in the US is creeping higher. The firm is a good barometer for how much disposable income is being spent on goods and services instead of being saved. The jobs market in the US is strong and even though wage growth rate isn’t great, it is ticking up along with consumer spending.
Visa posted a jump in revenue and earnings per share in the third-quarter, and both metrics were ahead of analysts’ estimates. A key measure for the business is the number of transactions, and in the latest quarter it grew by 11% – the market had expected growth of 9.9%.
The rebound in the US consumer sentiment is a large contributing factor to Visa’s rising income, and the company is considering merging with Visa Europe. The deal would greatly expand the company’s market as Visa Europe processed more than $16 billion in transactions last year. The European business is owned by more than 3000 banks, and 80% of them are needed to give their approval in order for it to go ahead. The deal is still being discussed, though regardless of the outcome Visa remains strong on its own.
When Visa reports its fourth-quarter numbers, dealers are anticipating revenue of $3.56 billion and EPS of 63 cents. The third-quarter revenue and EPS came in a $3.51 billion and 74 cents respectively. The credit card company will announce its full-year numbers on the same date, and traders are expecting revenue of $13.87 billion and EPS of $2.6, and these forecasts equate to a 9.2% jump in revenue and no change in EPS.
Investment banks are very bullish on Visa, and out of the 41 ratings, 33 are buys and eight are holds. The average target price is $83.35, which is 6% above the current price. Equity analysts are also very bullish on rival MasterCard, and out of the 43 ratings, 34 are buys, seven are holds, and two are sells. The average target price is $108.13, which is 8.4% above the current share price.
The number of short positions on Visa has increased by 12.5% since the third-quarter results were revealed. Then again, short interest on the stock has been rising throughout 2015 even though profits and the share price have been increasing.
Visa’s share price has been rising since 2009 and further gains are expected. The next level to watch will be $80 – should we see any pullbacks, it will provide a buying opportunity, and support will be found at $74.70 and the $71 areas.