To The Moon

$Visa(V)$

As the stablecoin industry gains momentum, many investors are questioning whether Visa’s dominance in the global payments ecosystem could be at risk. Having long recommended Visa as one of the premier dividend growth stocks, and holding it personally in my portfolio alongside Mastercard, I felt it timely to revisit the investment case.

Last week, comments by Federal Reserve Governor Christopher Waller brought stablecoins firmly into the spotlight, highlighting their potential to make payments faster, cheaper, and more competitive. For an incumbent like Visa, which has enjoyed unrivaled profitability and market share for decades, these developments merit close scrutiny. In this article, I examine Visa’s fundamentals, assess the threat posed by stablecoins, and update my investment recommendation in light of these shifts.

The Fed Puts Stablecoins on the Map

On Thursday, Governor Waller made headlines by stating that stablecoins—digital tokens pegged to fiat currencies—could improve the U.S. payment system by driving down transaction costs and increasing competition. As a staunch advocate of free markets, I agree that competition benefits consumers and businesses. However, heightened competition also challenges established players to defend their positions.

For Visa, which has built its success on enabling seamless global payments, the rise of stablecoins presents a credible long-term threat. Merchants, particularly at scale, could eventually migrate to lower-cost alternatives if the infrastructure matures and regulatory clarity emerges.

Visa’s Remarkable Business Model

Before evaluating the risks, it is worth revisiting what has made Visa so successful. Since 2015, the company has more than doubled its operating revenues—from $15.9 billion to $37.6 billion—and nearly tripled operating income, which grew from $9.1 billion to $25.1 billion. That translates into a compound annual growth rate of 11.6% for profits, outpacing revenue growth of 9.7%.

Most impressively, Visa has maintained operating profit margins exceeding 60%, a feat unmatched by nearly any other large-cap company. Even compared to high-flying tech names like Nvidia and archrival Mastercard, Visa’s consistency and scale stand out. For investors, this combination of growth, profitability, and resilience has been a winning formula.

Could Stablecoins Undermine Visa’s Moat?

The question now is whether stablecoins could meaningfully erode Visa’s competitive advantages. Today, Visa charges merchants approximately 3% of each transaction, plus a small fixed fee. For small businesses and individual sellers, this cost is acceptable in exchange for the trust, convenience, and global reach Visa provides.

Even if stablecoins could reduce transaction costs by a percentage point or two, the cost savings would often not justify the risks and operational burden of switching—especially given the unproven nature of these digital assets. Merchants must consider fraud prevention, chargeback mechanisms, and regulatory compliance, all of which Visa already provides seamlessly.

For smaller merchants, the incentive to adopt stablecoins is minimal for now. However, large retailers such as Walmart or Amazon, which process hundreds of billions in annual sales, could see meaningful cost savings by adopting lower-cost alternatives at scale. This is where stablecoins could gain traction over time.

Visa’s Ability to Respond

That said, Visa’s enormous profit margins leave it ample room to cut prices if competitive pressure mounts. The company has historically avoided engaging in price wars with Mastercard, preferring to compete on service and reach. But if stablecoins were to achieve widespread acceptance, Visa could lower its fees while maintaining profitability, thanks to its superior scale and cost structure.

With over 4 billion Visa cards in circulation globally, and deeply embedded relationships with banks, merchants, and consumers, Visa retains formidable pricing power and customer loyalty. Stablecoins may increase the risk profile for Visa in the long run, but they do not yet pose an existential threat.

Valuation at a Glance

Now turning to valuation: as of July 10, Visa trades around $355 per share. Based on my updated intrinsic value estimate of $418, the stock appears attractively undervalued. This upward revision reflects both the company’s resilient cash flows and a lower weighted average cost of capital, driven by falling U.S. Treasury yields since my last analysis.

On a forward price-to-earnings basis, Visa trades at approximately 30x, which I consider fair given its quality and growth prospects. In fact, three months ago, I viewed Visa as fairly valued. Today, the stock’s valuation has improved as risks have been better priced into the shares while fundamentals remain strong.

Competitive Dynamics in Context

It’s worth remembering that Visa has long faced the risk of disruption simply because it generates such high margins. Any industry earning returns on capital as high as Visa’s will inevitably attract new entrants. So far, however, none have matched Visa’s global infrastructure or scale.

Stablecoins, by contrast, are still in their infancy as a payments solution. While the technology holds promise, many questions remain about its scalability, reliability, and regulatory framework. For most merchants, the savings from switching are unlikely to outweigh these uncertainties in the near term.

Even if stablecoins gain some share in specific niches, Visa’s dominant position gives it the flexibility to defend its market share aggressively.

Investor Perspective: Risk vs. Reward

For long-term investors, the rise of stablecoins should be viewed as an incremental risk, not an immediate reason to exit the stock. The payments industry continues to benefit from secular tailwinds like global digitalization and rising transaction volumes.

As a shareholder myself, I acknowledge that Visa’s risk profile has risen slightly. However, I also believe that Visa remains exceptionally well-positioned to adapt and maintain its leadership in the evolving landscape.

Updated Recommendation: Still a Buy

Taking all of this into account, my updated recommendation is to buy Visa at current prices. While the stablecoin narrative warrants monitoring, Visa’s fundamentals remain robust, and the stock is now undervalued relative to intrinsic worth.

The company’s unparalleled network, consistent profitability, and ability to defend its margins give me confidence in its long-term prospects. Investors should, however, stay alert to competitive developments and regulatory changes in the payments space over the coming years.

Conclusion: Key Takeaways

Visa remains a world-class business, delivering impressive growth and exceptional profitability for more than a decade. The emergence of stablecoins introduces a credible long-term challenge, particularly for large merchants seeking to reduce costs at scale.

Yet, Visa’s entrenched market position, massive installed base, and unmatched scale give it a significant advantage. The company retains the ability to respond competitively, protect its margins, and continue delivering value to shareholders.

At $355 per share, Visa is trading below its intrinsic value estimate of $418, offering investors an attractive opportunity to accumulate shares in a high-quality business at a reasonable price.

Summary of Takeaways:

• Stablecoins increase competitive risk, but impact is likely to be gradual.

• Visa’s operating margins above 60% provide ample room to adjust pricing if needed.

• The company remains deeply entrenched with over 4 billion cards in circulation.

• Valuation has improved, making Visa an attractive buy at current levels.

• Long-term investors should monitor developments in digital payments but stay invested in Visa’s proven business model.

For patient, disciplined investors, Visa remains one of the most reliable and profitable ways to participate in the growth of global commerce — even as the payments landscape evolves.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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