What investors don't get about Visa
Are Visa's numbers telling us something about the American consumer?
For the most recent quarter, Visa's operating revenues of $3.16 billion were a gain of 6.9 percent from a year ago. And, its net income was up 25.8 percent to $1.6 billion thanks to a $218 million tax benefit.
But drill down a bit into the data and you'll find something interesting.
The total volume of credit purchases in the U.S. was $281 billion, a 10.2 percent gain over year. Meanwhile, debit purchases were at $408 billion or 6.4 percent higher than last year.
In the past three years, U.S. credit card transactions grew by at least 9 percent year-on-year every quarter.
So why aren’t traders giving Visa more credit?
"What happened during the winter really had a bigger effect than people expected," said CNBC contributor Gina Sanchez, founder of Chantico Global. "This bump up in consumer spending is just making up for that lost ground."
Consumer spending will have to build up if the GDP is to hit the expected range between 2.6 and 2.8 percent by year's end, according to Sanchez.
"We are seeing plenty of numbers that tell us that the economy is picking up, but it's picking up slowly," Sanchez said.
As for shares of Visa itself, Ari Wald, head of technical analysis at Oppenheimer & Co. is quite optimistic based on the stock's technicals, though he sees a little bit of rockiness ahead.
"I like the setup of Visa a lot," said Wald, who sees the recent pullback in the stocks as not breaking the overall long-term trend up. "This is the opportunity you've got to take advantage of. I think you can enter a small position here. However, I'm not quite sure that the near-term volatility we're seeing has quite run its course."
Wald is waiting to see if Visa is able to hold its $195 per share support level. He’s also paying attention to momentum indicators like the stock's oscillator or moving average convergence/divergence (MACD) indicator.
"It more or less measures the speed of price," Wald said of the oscillator. "Right now, momentum is at a very low level. It's oversold. It's still trending lower, though."
The direction of the MACD is important, according to Wald because it could indicate the stock's next move.
"I'd like to see that direction begin to turn sideways," he said. "Oversold is good. Oversold and turning higher [is] even better."
To see more of the discussion on Visa, with Sanchez on the fundamentals and Wald on the technicals, watch teh video above.
- Investment & Company Information