Why Visa stock exploded this morning

Stocks of credit card companies Visa (V 0.81%) It surged more than 3% in morning trading this morning after reporting (apparently) stronger than expected earnings for the second quarter of 2024 and significantly better than expected earnings.

Analysts expected Visa to post revenue of $8.1 billion and earnings of $2.29 per share for the current quarter. In fact, Visa earned $2.51 per share on $8.8 billion in revenue. However, investor enthusiasm for this news is waning by the day. As of 12:20 PM ET, Visa stock was up just 1%.

Visa’s second quarter earnings report

There may be some confusion about how much analysts expect Visa to earn and what its actual revenue will be. did Earn. Visa said its revenue, calculated in accordance with generally accepted accounting principles (GAAP), actually amounted to $2.29. This is exactly what analysts predicted. It was revealed that earnings of $2.51 per share were Visa’s only non-GAAP earnings, adjusted for what the company considers “one-time items.”

But these issues aside, there’s no debate that Visa crushed analysts’ revenue forecasts. Sales for the quarter were certainly $8.8 billion, up 10% year-over-year. And GAAP profits were up another 12%.

Is Visa stock a buy?

Visa seems to think this is a buyable number. During the quarter, the company repurchased $2.7 billion worth of stock. Unfortunately for investors, Visa paid an average of $280.80 per share for these share buybacks. This is more than the current stock value.

Was that a mistake?

maybe. As The Fly reported, Visa noted in its post-earnings conference call that it hopes to grow revenue back to “low double digits.” Assuming this translates into another 12% growth quarter, or even the 13% or so long-term growth rate Wall Street has pegged for Visa, the stock looks expensive to me with a P/E ratio near 32. It has a PEG ratio of 2.4 or higher.

I wouldn’t necessarily call Visa stock a sell, but it doesn’t seem like an attractive buy either.