A rare revenue estimate miss for Visa (NYSE: V) contributed to a mass selloff for the S&P 500 on Wednesday, with the payment processor’s stock price falling nearly 5% in response.The miss, Visa’s first since 2020, was only slight, with Q3 revenue up 10% to $8.9 billion versus estimates of $8.92 billion.Net income also rose 17% to $4.9 billion, while earnings per share jumped 20% to $2.40 per share, which was in line with estimates.Global payment volumes, the amount spent by Visa cardholders, increased 7% year-over-year, but that was a little below what analysts had anticipated.While mixed overall, Visa’s Q3 results saw its share price contract heavily, wiping out all gains seen this year. This was broadly in line with the wider market, with the Nasdaq falling 3%, while the S&P 500 fell 1.8%.Visa stock is now down 2.3% for the year.“In the U.S., while growth in the high spend consumer segment remained stable compared to prior quarters, we saw a slight moderation in the lower spend consumer segment,” Chris Suh, Visa CFO said on the Q3 earning call.The slow down in the “lower spend” consumer category, which means moderate-to-low-income individuals, is likely due to the higher rates on credit cards, causing consumers to spend less.
Lower interest rates should help
Visa did not change its revenue growth guidance for the full fiscal year, keeping it at low double-digit growth with earnings per share growth expectations remains in the low teens.It did, however, lower its expense growth range to high single-digits to low double-digits, from low double-digits in the previous quarter.For its fiscal fourth quarter ended Sept. 30, Visa expects low double-digit revenue growth and the high end of low double-digit earnings growth — same as Q3.If the federal Reserve lowers rates as anticipated, that could provide a boost in consumer spending and payment volume for Visa.
Should you buy the dip?
Several Wall Street analysts lowered their price targets for Visa, based on the expectation of continued slower growth. Yet most maintained their buy ratings, with a median price target of $310 per share, a 21% increase over the current price.Even the low end of the price target range, $265 per share, would result in 4% growth from the current level.We tend to agree, as today’s selloff had more to do with overvalued tech and large-cap stocks than Visa itself. No, the numbers weren’t great, but Visa has historically been one of the most consistent growers on the market with its duopoly in the credit card space, low overhead, and high margins.It is relatively cheap right now, with a P/E ratio of 28, down from 32 in March, and a forward P/E of 23, making it a good time to consider Visa. Today’s selloff presents a solid buying opportunity for investors.More By This Author:MCO: Is This Warren Buffett Stock A Buy After Q2 Earnings Beat?
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