3 Reasons to Buy Visa Shares Like There’s No Tomorrow

Visa (V -0.19%) it has historically been a wonderful investment. The stock is up 1,790% since its initial public offering in March 2008. That gain would have seriously boosted the portfolio’s performance, no doubt.

The stock is currently trading 8% off its all-time high (since Aug. 22). In addition to the recent decline, here are three reasons why investors should consider buying Visa stock like there’s no tomorrow.

Steady growth

Investors are always in love with companies that grow like wildfire. But what they fail to realize is that often, these gains are short-lived because they are not sustainable.

This is where Visa really shines. His growth certainly could not turn heads. But it is very durable. Over the past decade, the company has reported revenue growth of more than 7.8% each year (except for a 4.9% decline during the pandemic-filled fiscal 2020). It’s an impressive trend.

Investors can be optimistic that this momentum should continue for the foreseeable future. More than 50% of Americans still use cash for some of their weekly transactions. This is a surprisingly high rate, especially for one of the most developed economies in the world.

Just imagine the situation in emerging markets, where development is further behind. Visa has many opportunities to profit from the proliferation of cashless transactions in areas such as Latin America, Africa and Southeast Asia. This gives it a long growth track.

Huge profits

One of the most impressive features of Visa has to be its extremely high level of profitability. Between 2018 and 2023, earnings per share grew at an annualized rate of 13.5%. This is better than the annual revenue growth rate, which clearly demonstrates a scalable business model.

Because Visa’s technology infrastructure is largely built, no significant capital expenditures are required, resulting in tremendous free cash flow generation. And every additional transaction that the company handles should have very high margins. This explains why Visa’s global operating margin was 67% in the third quarter of 2024 (ended June 30).

Even the dominant leaders in their respective industries such as Apple, Netflix, NIKE, Costco, Chipotleor JPMorganfor example, it doesn’t come close to generating the kind of margins that Visa does. This is a business that is truly in a league of its own.

Network effects

I believe that investors can significantly improve their success by focusing exclusively on companies that possess an economic moat. In this way, their holdings have a kind of durable protection that helps defend their position in the industry against rivals and new entrants. This is the hallmark of a quality enterprise.

Visa fits perfectly into this category. She possesses network effects. There are 4.5 billion Visa cards in circulation around the globe and there are more than 130 million merchant locations that accept these cards as a payment method. This ubiquity is unmatched.

Banks want to issue credit cards that work with the Visa network, and people sign up for them because of how widely accepted they are. The utility speaks for itself.

On the other hand, merchants want to configure their payment systems to accept Visa because so many people have these cards in their wallets. They don’t want to lose customers and give up potential sales.

Visa’s entrenched setup makes it nearly impossible for anyone to develop a rival payment network from scratch. Not only would you have to solve the chicken or the egg problem, you would have to convince retailers, consumers and banks to want to adopt a whole new system. Luck.

In addition to sustainable growth and high profits, Visa’s network effects are yet another reason to buy the stock like there’s no tomorrow.