Visa (V, Financial) is under pressure today after posting Q3 results that met analysts' expectations but failed to exceed them. Investors, accustomed to Visa comfortably surpassing EPS and revenue estimates, viewed this performance as a step back. Payment volume growth slowed to 7% from 8% last quarter, reflecting persistent macroeconomic headwinds in the U.S. and China.
- On July 19, competitor American Express (AXP, Financial) also reported disappointing quarterly results, missing revenue expectations. This was surprising, given AXP's affluent customer base, which is typically less affected by softening consumer spending trends.
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Visa's update on current business trends may be weighing more heavily on the stock than the small top-line miss. The company disclosed that U.S. payments volume was up by just 4% so far in July (through July 21), with the slight deceleration driven by weather, the timing of promotional shopping events, and a technology outage.
- Cross-border volume growth also slowed to 13% compared to 14% in Q3, with travel-related volume growth tapering off. Outbound travel in the Asia Pacific region has recently weakened.
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Despite the challenging environment, Visa reaffirmed its FY24 net revenue guidance for low-double-digit growth. To achieve this outlook, Visa will need to reach its Q4 forecast of low-double-digit growth, an improvement from Q3's 9.6% growth.
- Given the deceleration in payment volume growth trends, there is uncertainty about whether Visa will meet its forecasts, contributing to the stock's selloff.
The main takeaway is that while Visa's results were generally stable, they didn't match the company's recent performances as sluggish discretionary spending impacted growth.
