Shares of credit card giant Visa (NYSE: V) jumped more than 3% in early trading this morning after reporting (apparently) stronger than expected fiscal Q2 2024 earnings -- and much better than expected revenue.
Heading into the quarter, analysts forecast Visa would earn $2.29 per share on $8.1 billion in revenue. In fact, Visa earned $2.51 per share on $8.8 billion in sales. Investors' enthusiasm for the news is, however, moderating as the day wears on. As of 12:20 p.m. ET, Visa stock has retraced to just a 1% gain.
Visa's Q2 earnings report
There may be some confusion about what analysts predicted Visa would earn, and what it actually did earn. Visa noted that its earnings as calculated according to generally accepted accounting principles (GAAP) were actually $2.29 on the nose -- exactly what analysts predicted. The $2.51 per share earnings, it turns out, was only Visa's non-GAAP profit, which adjusts for what the company considers "one-time items."
That quibble aside, however, there's no debate that Visa trounced analyst revenue predictions. Revenue for the quarter was definitely $8.8 billion, a 10% increase year over year. And GAAP profits were up even more -- 12%.
Is Visa stock a buy?
Visa seems to think these are buyable numbers. Over the course of the quarter, it bought back $2.7 billion worth of its own stock. Unfortunately for investors, Visa paid an average of $280.80 per share for these buybacks -- more money than the stock is worth today.
Was that a mistake?
Perhaps. In its post-earnings conference call, Visa mentioned that it hopes to grow earnings again in the "low double-digits," as The Fly reports. Assuming this translates to another 12% growth quarter -- or even the 13% or so long-term growth rate that Wall Street has Visa pegged for -- the stock looks expensive to me at a P/E ratio of nearly 32, and a PEG ratio of at least 2.4.
While I wouldn't call Visa stock a sell necessarily, it doesn't look like a compelling buy either.
Where to invest $1,000 right now
When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for two decades, Motley Fool Stock Advisor, has more than tripled the market.*
They just revealed what they believe are the 10 best stocks for investors to buy right now… and Visa made the list -- but there are 9 other stocks you may be overlooking.
*Stock Advisor returns as of April 22, 2024
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Visa. The Motley Fool has a disclosure policy.
