The drop in valuation that many fintechs are experiencing could make companies like Visa more likely to acquire them than compete against them.
"There's been a burst of the balloon in valuations in the fintech world," said Al Kelly, Visa's CEO, during Thursday's earnings call.
Visa's earnings beat analysts' expectations, though company executives said the card network was monitoring for potential softness due to inflation or other economic pressures. For the quarter ending December 31, Visa reported revenue of $7.94 billion, up 12% from about $7 billion a year earlier. Earnings per share came in at $2.18; analysts estimated revenue of $7.68 billion and earnings of $2.01 per share, according to Zacks.
Cross-border payment volume increased 36%, to $2.87 billion in the fourth quarter, from about $2.1 billion a year earlier. It's the seventh consecutive quarter of increasing earnings and eighth straight quarter of revenue growth for Visa. Visa's stock rose about 1.5% in after-hours trading on Thursday.
Under analyst questioning on whether Visa is looking to be more aggressive in mergers and acquisitions during a potential economic downturn, Kelly did not commit to future deals, saying Visa focuses first on organic growth. But he also made note of the decline in
The trend of lower valuations is a helpful characteristic of the current environment, Kelly said. "We will look for capabilities and management teams that will bring more value to Visa than we can bring ourselves."
Visa's
Visa closed the Tink acquisition in 2022. Kelly mentioned Tink during Thursday's earnings call as being key to Visa's value-added services strategy, particularly regarding open banking. Tink recently signed an agreement with BNP Paribas and Banka d'Italia in Italy. "Tink has continued to develop and deepen relationships across Europe," Kelly said.
Visa and Mastercard have sought to diversify revenue through services. Visa reported revenue for this part of its strategy reached $1.7 billion in the most recent quarter, up about 20% over the prior year. This growth has helped bolster Visa's overall earnings growth, the company reported.
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Full recovery for cross-border travel for China may take three to five quarters, according to Vasant M. Prabhu, Visa's chief financial officer. "Inbound travel to China has not improved much and may not until the COVID situation there stabilizes," Prabhu said.
Overall, Visa reported consumer spending has remained resilient despite high inflation, leading the card network to affirm its growth projection for the next quarter in the high single digits.
"Business trends have been remarkably stable," though there is still much economic uncertainty in the months ahead, Prabhu said. Visa would make adjustments if necessary should economic conditions deteriorate, Prabhu said.
In a research note, Jeffries reported Visa's pace of U.S. payment growth rebounded in January. Similar to Mastercard's trends, Jeffries noted a pause on travel growth, and added January's year-over-year growth comparison was buoyed by a slowdown in January 2022 due the headwinds from the coronavirus' omicron variant. Higher gas prices relative to the fall may also be helping Visa's January growth, according to Jeffries.
Thursday's call was Kelly's last as CEO.
"I cannot think of a finer leader to continue to position Visa at the center of money movement," Kelly said.
