By Niket Nishant and Manya Saini | REUTERS
Visa’s underwhelming third-quarter revenue prompted a number of brokerages to cut their price targets on the company’s stock, stoking concerns about slowing growth in customer spending and casting a shadow on the U.S. payments industry.
The results underscore the challenges the industry is facing after several quarters of growth as inflation and high borrowing costs prompt a large section of customers to cut back on purchases, while wage growth loses steam.
Visa also reported a slowdown in U.S. payments volumes through the first three weeks of July, which it said was due to a number of factors including the CrowdStrike-related outage last week.
Shares of Visa fell nearly 4% to $254.13 and wiped out the gain they have seen this year. At least nine prominent Wall Street brokerages lowered their price targets on the stock.
“We don’t expect a positive change in narrative,” Jefferies analysts wrote in a note. “The current (valuation) multiple will prove a good entry point, but (we) struggle to see a near-term catalyst.”
“We would not be surprised to see shares more range-bound over the next few months until there is greater clarity on the FY25 guide,” Raymond James wrote.
Rival Mastercard’s shares were down 2.5%, while PayPal Holdings and Block slipped 1% and 2.6%, respectively.
Visa also said payments volumes in Asia Pacific had slowed due to the economic environment, most notably in China. A prolonged property crisis and weak business sentiment has weakened the country’s economy.
Meanwhile, other large U.S. companies such as Coca-Cola, PepsiCo and Domino’s Pizza also warned of pressures on lower-income households in their latest quarterly results.
“We’re seeing much more price sensitivity and consumers looking for more value,” PepsiCo CEO Ramon Laguarta said earlier this month.
Editor’s Note: Reporting by Niket Nishant, Manya Saini and Ananya Mariam Rajesh in Bengaluru; Editing by Shinjini Ganguli
