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Visa Charges Ahead of the Competition

Management at Visa (V) has been doing everything right, and 2019 has been the year that the market prices in all of the market growth and technological innovation, observes Todd Shaver, editor of BullMarket Report.

The stock is up 30% this year, which is sensational for a $380 billion blue chip. Visa is benefitting from a boom in global payments processing, as more and more transactions shift from cash to card.

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Estimates are that the total addressable market will expand by 10% per year for the next five years, to over $3 trillion. In 1Q19, Visa’s total payments volume grew 7% — that beats rival the 5% growth of Mastercard (MA).

US growth for Visa hit 11%, beating Mastercard’s 8% growth. So the underlying market is expanding, and with Visa owning over 50% of all credit transactions, expect more and more top-line as customers continue to use their cards more frequently.

The prominence of payments in the global financial services system has undeniably risen over the 12 years that McKinsey has formally tracked the sector’s dynamics. Even against this backdrop, however, 2017’s results are striking.

The 11 percent growth generated by payments— which topped $1.9 trillion in global revenue—is the largest annual increase we have measured in the past five years.

The milestone of a $2 trillion global industry is set to be surpassed two years sooner than expected, and a $3 trillion threshold looms just beyond our five-year projection horizon.

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And when it comes to industry disruption, Visa is actually a leader, despite being the largest player in the space (usually disruptors are the little guys).

Visa has already implemented tap-and-pay cards for NYC subways and buses, which makes paying your fare much easier than traditional swiping. Expect Visa to roll this feature out nationwide — and eventually worldwide — to increase market penetration.

Visa also recently acquired Earthport, a platform that enables cross-border money transfer. Visa expects to use Earthport technology to substitute for wire transfers, which take time and are costly. Users will be able to send and receive money internationally without the hassle of a wire.

Visa carries a PE ratio of 35. Rival Mastercard is more expensive on a PE basis, at 43. So if you want exposure to the global payments processing market — and you certainly should, given the consistent, predictable growth — then Visa is the way to go, as the company is cheaper than its closest rival.

The company is aggressively expanding its global footprint. We’re already at all-time highs, and we wouldn’t be surprised if the stock tops $200 later this year or into 2020.

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