Updated Aug 7 at 11:26am ET.
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US employers unexpectedly cut 23,000 jobs in July, falling well short of the 80,000 gains analysts had expected. Hiring for the previous two months was also revised lower, suggesting the labor market is cooling faster than many anticipated.
This matters for Visa because its revenue is tied directly to how much people spend. When fewer people are working, overall consumer spending tends to slow down, which means fewer transactions for Visa to process. While the company's global network is diversified, a weaker US job market is a headwind for its largest region.
Source: Bloomberg Markets and Finance
Western Union and the platform Rain have launched a way for people to hold value in stablecoins, which are digital tokens designed to stay equal in value to the U.S. dollar. This is particularly useful in countries where the local currency is unstable and loses value quickly. Because this is built on Visa's rails, these users can spend their digital dollars at any of the millions of stores or ATMs that already accept Visa. For the company, this is another step in moving beyond just traditional credit cards and becoming the plumbing for all types of digital money movement.
Visa is spending $2.4 billion in cash to acquire BioCatch, a company that uses behavioral biometrics to stop fraud. Instead of just checking a password, this technology analyzes how a person actually interacts with their device, such as their typing speed or how they swipe a screen, to verify they are who they say they are.
While $2.4 billion is a large sum, it is a small fraction of Visa's total value and is easily covered by the cash the business generates. The real value here is defensive. As scammers use AI to create more convincing fakes, Visa needs better tools to keep its network trusted. If people feel safe using their cards, they spend more, which keeps Visa's "digital toll road" profitable.
Source: WSJ
Visa is cutting roughly 2,600 positions, mostly in its technology and product departments. Management noted that artificial intelligence is changing how work gets done at the company, allowing it to operate with fewer people in certain areas.
For a company that already has very high profit margins, these cuts are about staying lean rather than a sign of financial trouble. It shows the company is aggressively using new technology to keep its own costs down even as it grows its global payments network.
Visa reported a strong quarter, with revenue reaching $11.6 billion and earnings of $3.32 per share, both of which were higher than analysts expected. The results show that people are still spending steadily on their cards despite worries about the economy, with total payment volume and cross-border transactions both showing healthy growth.
Beyond just consumer cards, the company is seeing success in its "new flows" business, which includes things like business-to-business payments. It also returned $6.2 billion to shareholders through dividends and buybacks. This quarter reinforces the idea that Visa remains a highly profitable toll road for global commerce that can grow even in a complicated economic environment.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
Analysts recently issued a flurry of price target increases for Visa. Most analysts, 53 out of 62, rate the stock a buy, and the average target of $418 suggests a 15% gain from today's price.
The company has a perfect record of clearing the bar set by analysts over the last two years. Management consistently sets targets they can beat while maintaining double-digit revenue growth.
| Expectation | |
|---|---|
| EPS | $3.43 |
| Revenue | $12.10B |
