Visa(V.US)
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By Emily Bary
Full-year revenue outlook looks 'overly conservative' amid recovery in cross-border spending, according to Raymond James
In the words of Wolfe Research analyst Darrin Peller, $Visa(V.US)$'s earnings outlook came with "extensive parameters."
Among them was Visa's (V) disclosure that its forecast for the fiscal year ahead assumes that the economy retains stable. In other words, the company didn't bake a recession scenario into its new annual targets, though executives said they were prepared to adjust quickly in the event of an "economic or geopolitical shock."
Since Visa has a September-ending fiscal year, its outlook was hotly anticipated as it would provide an early glimpse of what the payments universe could expect in an uncertain year ahead.
Investors appeared relieved, sending Visa shares up 4.6% in Wednesday's session, as peer $MasterCard(MA.US)$ saw its stock rise 2.4%.
Visa executives maintained late Tuesday that the company had yet to see spending pressures manifest in results, with Chief Financial Officer Vasant Prabhu telling MarketWatch that numbers showed "no evidence of consumers feeling a pinch" or "consumers feeling anxious."
Though companies from $Sleep Number(SNBR.US)$ to $3M(MMM.US)$ have discussedconsumer pressures, Visa's numbers are more reflective of absolute spending levels across the economy, regardless of whether or not people are pulling back on certain discretionary categories as they allocate more money to essentials.
With that backdrop, what to make of an outlook that assumes the economy stays the same? Even as Prabhu acknowledged in Visa's broader earnings-call commentary that there's "a high risk of a global recession," some analysts thought the company's recession-free forecast might actually be restrained.
Raymond James analyst John Davis saw room for upside, noting that while Visa's revenue outlook for high-single-digit revenue growth was below the 10% consensus forecast, "this is largely related to client incentives...and appears overly conservative" as cross-border spending continues its recovery.
Wolfe's Peller took a somewhat similar view.
"Importantly V provided extensive parameters for its FY 2023 expectations, and we see elements of conservatism in its 1H23 assumptions despite basing its outlook on a consistent macro environment. Investor feedback on V's guidance for [high-single-digit] reported revenue growth in 2023 has been constructive, although the [high-single-digit] nominal expense guidance was higher than some expectations."
- he wrote.
Jefferies analyst Trevor Williams was a bit more tempered.
"While we would have preferred a more conservative baseline for the initial FY23 revenue outlook (assumes no recession) to help de-risk the go-forward, we're encouraged by continued strength in domestic volumes/ongoing cross-border recovery, take comfort in [management's] commitment to use expenses as a buffer against any top-line slippage, and like the entry point with valuation near five-year lows."
- he wrote in a note to clients.
Others were just happy the initial outlook is now out of the way.
"Notably, Visa has assumed stability of trends (and no recession) in its FY23 guidance, but we believe there are a number of factors which may cushion [numbers] even in the event of a recession. With the dreaded 2023 guide behind us, continued strength in underlying [numbers], & relative valuation (bottom quintile in 10-year history), we struggle to see a sustained apathy/bear case for the stock."
- wrote Bernstein's Harshita Rawat
Though Mastercard has a traditional fiscal year and isn't necessarily expected to give an expansive full-year forecast, investors will get another take on the spending landscape when the company posts its own numbers Thursday morning.
-Emily Bary
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