Visa lowered its outlook, and it’s pointing to everything from Russia to the U.S. dollar. Yet, could the stock, which took a hit on Friday, actually be a buy?
The world’s largest credit card company trimmed its outlook for 2014, saying a stronger U.S. dollar and “tepid growth” from cross-border transactions were hurting its revenue. In a call with analysts to discuss its results, Visa CEO Charlie Scharf and CFO Byron Pollitt cited the conflict in eastern Ukraine as part of the reason why cross-border volumes declined.
Though the stock fell 3.6 percent on Friday, to close at $214.77, Katie Stockton, chief technical strategist at BTIG, is positive on Visa based on its charts.
“I think if you’re bullish on the broader market you should also be bullish on Visa,” Stockton said. “The stock is in a long-term uptrend; it does have improved momentum after that April low.”
After Visa reported disappointing earnings in April, the stock dropped below $200 per share, but it has yet to revisit that level since.
“The risk/reward is actually quite favorable,” Stockton said. She sees Friday’s “gap down” for Visa’s shares as a near-term setback. However, they remain above its upward-sloping 200-day moving average at $212 per share.
“On the chart there is some support right around $205 to $207 and, with next resistance up around $235 to $236, it creates a pretty compelling risk/reward,” Stockton added.
However, Erin Gibbs, equity chief investment officer at S&P Capital IQ, doesn’t think Visa is an attractive buy despite the recent drop. She notes that Visa is not any of her company’s advised portfolios and she does not foresee it as being added anytime soon.
“When [price] gets below 21 times forward earnings, that’s when it gets a little more attractive,” said Gibbs, who said that level is somewhere between $205 and $210 per share. “Earnings really haven’t come down but again those revenue concerns are out there.”
Though Visa’s price-to-earnings multiple has come down from its highs around 26 back in February, Gibbs doesn’t see it reversing course just yet.
“Until we really see some momentum, some positive catalyst for this company, we’d view this as an ‘avoid,’” Gibbs said.
To see the full discussion on Visa, with Stockton on the technicals and Gibbs on the fundamentals, watch the above video.