We’re buying Visa, this Scotia Wealth advisor says

Recession fears have put a lid on bullish sentiment toward payments and fintech names, but investors shouldn’t fear a stock like Visa (Visa Stock Quote, Charts, News, Analysts, Financials NYSE:V), according to Scotia Wealth Management advisor Stan Wong, who just named the credit card giant as one of his top picks for the year ahead.

“With travel and pent up demand for travel surging, Visa is going to benefit along with MasterCard and others. They’ll benefit from more transactions in the higher margin cross-border segment,” said Wong, portfolio manager at Scotia, who spoke on BNN Bloomberg on Wednesday.

“Overall, the US consumer continues to be strong. We talked about the potential for a slowdown and recession — I don’t think the US consumer got that memo because just recently we saw retail sales march to a brand new high,” he said.

Last week, Visa announced a leadership transition, with CEO Al Kelly, who has been at the helm since 2016, stepping down to make way for current President Ryan McInerney to take over the top spot. The company is touting the advantage of not having to look outside for their new leader, at a time when the ongoing digital transformation across all industries is causing major changes for companies like Visa.

McInerney recently spoke on a CNBC segment about how Visa is well-positioned to take advantage of the long-term trend toward digitization.

“When we look out two, three, five, ten years, the opportunities are enormous,” said McInerney, speaking on CNBC. “You look at the consumer commerce business around the world, there are still trillions and trillions of dollars of cash and cheques spent every year. You look at business-to-business payments, person-to-person payments, government payments and we just see an enormous opportunity to digitize those payment flows all around the world for years and years.”

Visa released its fourth quarter fiscal 2022 financials last month, showing full-year revenue up 22 per cent to $29.3 billion, with net income of $15.0 billion or $7.00 per share.

“As we look ahead, while some short-term uncertainty exists, we remain confident in Visa’s long-term growth trajectory across consumer payments, new flows and value added services,” said Kelly in the company’s Q4 2022 earnings report.

For Wong, Visa’s fundamentals are strong, pointing to its solid free cash flow, no material debt and management’s forecast, which is solid in its guidance on sales and earnings growth.

“They’re clearly the world’s leader in digital payments: 3.7 billion credit and other payment cards in circulation around across 200 countries, $32 billion in revenue expected for fiscal 2023, and last month they actually initiated a new $12 billion share buyback program and increased their dividend by 20 per cent,” Wong said.