Visa Inc.

V Details

Visa Inc. (NYSE: V) is a significant payment processor around the globe. It permits global trade and money transfer among more than 200 countries and territories' customers, merchants, financial institutions, and government agencies. During FY21, the company witnessed 232 billion payments and cash transactions through its brand, with an average of 637 million every day. As a result, out of 232 billion transactions, Visa processed 165 billion.

Latest News:

• Recent Acquisition: On March 10, 2022, Visa completed its acquisition of Tink, an open banking platform that enables financial institutions, fintechs, and merchants to build and deploy financial products and services. Tink's customers may move money, view aggregated financial data, and use intelligent financial services like risk insights and account verification using a single API.
• Share Repurchase Program: In Q1FY22, VISA repurchased 19.4 million shares of class A common stock at an average price of USD 210.05 per share for USD 4.1 billion. In addition, on December 13, 2021, the VISA board approved a renewed repurchase program to buy back class A common stock worth up to USD 12.0 billion. The company had a remaining USD 12.6 billion under previous authorizations on December 31, 2021.

• Suspension of Russia Operations: Visa announced the suspension of its Russia activities, effective March 05, 2022. Visa will work with its clients and partners in Russia to suspend all Visa transactions in the coming days, beginning immediately. Once completed, all transactions conducted with Visa cards issued in Russia will no longer be valid outside of the country. Visa cards issued by financial institutions outside of Russia will no longer be valid within the Russian Federation.

Q1FY22 Results:

• Double-Digit Growth in Revenues: The company's net revenues during Q1FY22 were USD 7.06 billion, a 24.13% increase YoY from USD 5.69 billion during Q1FY21, driven by growth in payments volume, processed transactions and cross-border volumes slightly offset by higher client incentives.
• Growth in Bottomline: Net income was USD 3.96 billion during Q1FY22, compared to USD 3.13 billion during Q1FY21.
• Cash and Debt Position: The company had USD 15.92 billion in cash and cash equivalents (including short-term investments) as of December 31, 2021, and total debt of USD 20.92 billion.

Key Risk:

• Dependence on Third Parties: The company relies heavily on relationships with its account holders, third-party vendors, and suppliers to support its products and services and compete effectively in the market. Poor performance by these third parties could result in a negative experience for Visa's account holders, harming the company's revenue and reputation.
• Technological Risk: Visa may be particularly exposed to cyber-attacks because of its prominence and involvement in the global payments business. As a result, any system malfunction or outage could generate unfavourable attention, particularly on social media, harming the company's brand and financial performance.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

Visa's stock price has fallen 13.13% in the past nine months and is currently leaning towards the lower end of its 52-week range of USD 186.67 to USD 252.67. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 251.24.

Considering the correction in the stock price, inorganic growth initiatives, strong financial performance,  associated risks, and current valuation, we recommend a "Buy" rating on the stock at the current price of USD 202.445, up 1.03% as of March 15, 2022, at 10:59 AM ET. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Three-Year Technical Price Chart (as of March 15, 2022, at 10:59 AM ET). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

IAC/InterActiveCorp

IAC Details

IAC/InterActiveCorp (NASDAQ: IAC) operates as a digital media and internet holding company. It holds majority ownership in and operates various public companies worldwide and currently generates revenue from 4 segments. 1) 1) Angi Inc., that connects home service experts with customers, 2) Dotdash, a digital publishing brand portfolio that provides information on specific vertical content categories, 3) Search, comprising a cluster of websites offering general search services and direct-to-consumer downloadable desktop applications and 4) Emerging & Other, which includes Care.com, Mosaic Group, Bluecrew, etc.

Latest News:

• Strategic Investment: MGM Resorts International and IAC announced on February 14, 2022, that they would each purchase 4.5 million shares of MGM Resorts common stock at $45 per share from Corvex Management LP ("Corvex") for a total aggregate amount of $405 million, or $202.5 million each.

FY21 Results:

• Growth in Topline: The company reported a YoY increase of 33.82% in overall revenue to USD 3.70 billion in FY21 (ended December 31, 2021) from USD 2.76 billion in FY20, attributable to growth in all the segments.
• Improvement in Profitability: In FY21, IAC's net income increased to USD 597.55 million from USD 269.73 million in FY20.
• Cash and Debt Position: The company had USD 2.14 billion in cash and cash equivalents as of December 31, 2021, and total debt of USD 2.08 billion.

Key Risk:

• Dependence on Dotdash: Online advertising (Dotdash and Search sectors) generates a significant portion of revenue and decreases advertising expenditures or levels of confidence in consumers, and discretionary spending could be detrimental to IAC's business.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

IAC's stock price has fallen 35.42% in the past nine months and is currently leaning towards the lower end of its 52-week range of USD 93.85 to USD 179.12. We have valued the stock using the Price/Sales Per Share Value-based relative valuation methodology and arrived at a target price of USD 119.26.

Considering the significant correction in the stock price, strategic investments, solid net margins, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the current price of USD 96.40, up 1.90% as of March 15, 2022, at 02:07 PM ET. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Three-Year Technical Price Chart (as of March 15, 2022, at 02:07 PM ET). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

The Western Union Company

WU Details

The Western Union Company (NYSE: WU) operates as a money movement and payment service firm, enabling individuals and businesses to transfer money and make payments globally. The company's money transfer transactions services are offered in over 200 countries and through its websites and mobile applications. WU derives its revenue from fees paid by customers for transferring money.

Latest News:

• Geographical Expansion: On February 15, 2022, Western Union and Travel Wallet, one of the country's leading fintech startups, have announced the availability of Western Union money transfer services through the Travel Wallet App. Travel Wallet users in South Korea can now send money through Western Union. Both Android and iOS users can download the Travel Wallet app. Customers can fund cross-border money transfers with funds from their local bank accounts. Cash and bank account payouts are now accessible in a few countries, with intentions to expand to include the complete breadth and reach of Western Union's global payout network.

FY21 Results:

• Flat Topline: The company reported a YoY growth of 4.88% in revenue to USD 5.07 billion in FY21 (ended December 31, 2021) from USD 4.84 billion in FY20, attributable to growth in Consumer-to-consumer and Business Solutions segments.
• Growth in Profitability: In FY21, WU's net income increased to USD 805.8 million from USD 744.3 million in FY20.
• Cash and Debt Position: The company had USD 1.21 billion in cash and cash equivalents as of December 31, 2021, and total debt of USD 3.01 billion.

Key Risk:

• Competition Risk: WU competes directly with numerous financial and non-financial company sectors in the highly competitive money transfer and commercial payments industry. The rising competition from new competitors, as well as the consolidation and expansion of competitors' services, have had an impact on WU's distribution network and channel choices. Should this trend continue, it could harm the company's financials.

Outlook:

FY22 Outlook (Source: Earnings Release, FY21, February 10, 2022)

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

WU's stock price has fallen 28.65% in the past nine months and is currently leaning towards the lower end of its 52-week range of USD 15.69 to USD 26.61. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 21.37.

Considering the significant correction in the stock price, geographical expansion, solid margins, positive outlook, associated risks, and current valuation. We recommend a "Buy" rating on the stock at the current price of USD 17.46, up 0.23% as of March 15, 2022, at 12:49 AM ET.

Three-Year Technical Price Chart (as on March 15, 2022, at 12:49 AM ET). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.