Visa Inc. (V) is a global leader in payment technology that offers electronic payment solutions in the form of debit, credit and pre-paid card transaction processing for merchants. The company continues to find strategic partners to leverage its technology and global presence to grow its market share in the financial services industry.

As of market close on 9/18/2015, Visa shares were trading at $69.79, up 31% over the last 52 weeks. Shares are currently trading towards the high end of the company’s 52-week range of $48.80-$76.92 but are below their 50-day moving average of $72.02 and above their 200-day moving average of $69.17. At $69.79 per share, Visa has a price-to-earnings ratio of 27.5x with earnings of $2.53 per share. JP Morgan (JPM) has an Overweight rating on Visa and increased its price target from $74 to $85 per share while Bernstein maintained an Outperform rating and $90 share price target. These price targets represent upside of 22% and 29%, respectively. Visa has an average analyst estimate of $82.13 per share, about 18% higher the company’s most recent closing price – so shares offer considerable upside on a solid company with industry-leading presence.

Visa paid a quarterly dividend of $0.12 per share on September 1, 2015, flat compared to the prior quarter but up about 20% year-over-year. The dividend was applicable to Class A, B and C common shares. The company has an annualized dividend of $0.48 which is up from $0.42 in 2014 and $0.3475 in 2013. Visa has delivered annual dividend increases over each of the past six years consecutively, and outperformed analyst and market expectations. Visa offers investors a 0.69% dividend yield which is equal to the dividend yield at its biggest competitor MasterCard Inc. (MA) but well below Discover Financial Services (DFS) dividend yield of 2.13% and American Express Company (AXP) at 1.54%. Additionally, Visa has about $2.8 billion left under the company’s $5 billion share repurchase program which represents solid upside for shareholders. Visa historically returns value to shareholders through share buybacks rather than dividends.

For the three months ended June 30, 2015, Visa reported total operating revenues of $3.52 billion, up approximately 12% from the year ago period. Service revenues increased 9%, data processing revenues increased 6% while international transaction revenues increased 21% remarkable growth given five-fold higher revenues relative to 2004. Management expects further international growth despite foreign currency exchange volatility, largely linked to increased travel by U.S. citizens to Latin America, Central Europe, Middle East and Africa. For the quarter, Visa reported net income of $1.70 billion, or $0.69 per Class A share, with the strongest quarterly EPS growth in about 5 years that came in well ahead of analyst estimates of $0.59 per share.

In its most recent fiscal year, Visa reported net profit margins of 43%, much higher than MasterCard, American Express and Discover Financial which reported net profit margins of 38%, 16% and 27%, respectively. With only about one-twelfth of the company’s revenues going towards research and development, operating expenses are expected to remain flat which positions Visa to continue outperforming its competition on margin and cash flow.

Sustainable margins are a positive for investors as the company is expected to continue to increase its quarterly dividend. Dividend coverage and revenue growth are also supported by the company’s expansion into China, where the high volume of transactions could more than double the company’s revenues with China’s government having opened up the financial service sector this April 2015, including bank card transactions, to foreign companies.

Visa recently launched biometric identity verification as part of its EMV chip technology; biometrics allow transactions to be completed using palm, voice, iris or facial recognition. The new technology increases security as an alternative to entering a PIN and is easily adaptable to the 3.3 billion debit and credit card chips already in use around the world. ABSA Bank in Africa will be the first to start implementing the new technology. The company is expected to grow its biometrics technology in chip cards with its merchant partners through 2016. Visa recently signed new merchant agreements with companies in the United States, Australia, Canada, China, Columbia and the United Arab Emirates. Most notably, Visa will partner with Citibank Inc. (C) and Costco Wholesale Corporation (COST) effective April 1, 2016, to handle all credit cards after over 16 years of Costco having had an exclusive relationship with American Express. Costco is the second largest retailer in the U.S. behind Wal-Mart Stores Inc. (WMT), with 474 warehouse locations and an upwardly mobile customer base that is comfortable spending on big ticket items.

Visa has positioned itself nicely in the new world of digital wallets and mobile payments with a successful partnership with Apple Pay. Visa has also made a strategic investment in mobile payment startup Stripe which analysts value at over $5 billion. Much like PayPal (PYPL), Stripe charges a nominal fee to complete debit and credit card transactions. Stripe has capitalized on the increased demand at small- and mid-sized companies for alternative payment arrangements of a certain security level. Stripe gives Visa access to an incredibly competitive mobile payment market.

JP Morgan, United Airlines (UAL) and Visa extended their partnership to offer the United MileagePlus credit card. The companies have over 20 years of joint partnership experience which has been extremely successful for all parties. As the economy continues to recover from the recession, sharply higher airline travel ad airline industry profits have played in Visa’s favor. Visa also established a partnership with online travel portal Orbitz Worldwide (OWW) to offer the Visa Travel Manager end-to-end solution to corporate clients. The new solution, to be launched in October 2015, allows companies to track employee spending on travel.

Visa and Visa Europe continued preliminary talks on an acquisition of Visa Europe by Visa. Currently, Visa Europe, a former subsidiary, is owned by over 3,000 different financial institutions within Europe. Both companies are in support of a Single Euro Payments Area (SEPA) which favors the odds of successful acquisition and integration. Analysts value the potential acquisition at over $21 billion. If the transaction were to be completed, Visa would receive all of Visa Europe’s deferred payments and other significant financial performances. The acquisition should unleash sizable scale efficiencies and boost Visa’s revenues and profit margins as a merged entity.

Visa faces intense competition in a field that is witnessing disruptive change but Visa continues to outperform its competitors with impressive margins while also acquiring equity stakes in promising game changers such as mobile payments firm Stripe. Despite its somewhat high valuation ratios, Visa continues to be a smart buy for long-term investors because of the company’s brand, platform and relationships with vendors and card users across the globe, growth prospects in China, scale efficiencies with a potential Visa Europe acquisition and other strengths.

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