In the run-up to the release of the second quarter report, analysts following Visa Inc (NYSE:V)
forecast earnings of $2.18 per share. Revenue for the period was expected to come in at $3.19 billion according to the consensus estimates of 28 analysts surveyed by Businessweek. In the same three months of 2013 the company earned $1.92 per share on revenue of $3 billion.
Visa earnings battle economic growth
Visa is a payments processor. That means that period of consumer sluggishness are incredibly harmful to its revenues as can be seen by the collapse in takings in the wake of the economic crisis. When the company’s fortunes are looking up, it is difficult for it to beat the rate at which the economy is growing by all that much.
In order to work around that problem Visa Inc (NYSE:V) has been investing in other ways for consumers to use their payments processing platform. The firm has expanded aggressively outside of the United States, and it has jumped on the back of a general trend toward the use of plastic money in order to expand its earnings.
Despite those efforts, investors are expecting a huge amount of growth from Visa Inc (NYSE:V) in the coming years, and they’re certainly looking for the company to beat the trend of the wider economy. With expectations weighing, though revenue is growing, the company may be at risk from a correction on surprisingly poor results.
Non-traditional competition a worry at Visa
Visa is in a market with a lot of competitors, and the company faces at least one almost-perfect substitute, in the form of cash. Mastercard Inc (NYSE:MA) and American Express Company (NYSE:AXP) have always been seen as the company’s traditional competition, but those impressions may be changing. A slew of digital alternatives have become norms in recent years, and their effect may become more important in determining Visa Inc (NYSE:V) success.
Either Visa Inc (NYSE:V) moves with the times or it begins falling behind. Investors are betting that the company’s competitive advantage, the most important element of which is probably the trust that consumers have in its brand, can hold off any competition in time for its own evolution. Technological underachievement is the biggest risk built into Visa, and investors are better off accounting for it.