CS-Visa Inc.

Visa Inc. FQ3 2022 Earnings Recap; Updated 2019-base CAGR V Target price (12M, US$) 240.00 Outperform Specialty Finance | Forecast Change FQ4 2022 revenue growth ex-FX moves higher: Visa’s FQ4 2022 outlook calls for net revenue growth of high-teens to ~20% YoY ex-FX (or roughly mid-teens on a reported basis) driven by better cross-border revenue and stable domestic volume trends. Importantly, cross-border travel continues to improve, having reached ~116% of 2019 levels in July (steady improvement from the low 90%s in March-April) ahead of prior expectations for 2019 levels to be reached by the September quarter. Absent a meaningful recession (reducing the PCE component of Visa’s growth algorithm) estimates will continue to benefit from remaining runway for cross-border travel recovery (levels that would have been at least ~130-135% of 2019 under a normal scenario), benefits from FX volatility (FQ4 2022 and FQ1 2023 with still easy compares ahead). Further, we continue to believe that Visa has attractive qualities in the current environment, including profitability (~65-70% EBIT margins, high FCF conversion, GAAP-like EPS), balanced exposure (discretionary vs. non-discretionary, goods vs. services, online vs. in-store), ability to grow through moderate recessionary conditions, inflationary benefits (~60% of gross revenue priced ad valorem), and mix shifts (cross-border evolving to become more eCommerce-focused [less travel-focused], supportive of accelerated growth) as outlined in our recent deep dive, “Visa & Mastercard: Analyzing the Medium-Term Growth Algorithm”. What we liked: 1) Net revenue beat the Street by ~3% owing to strength in cross-border, value-added services, and client incentives (International Transactions revenues beat by ~12%, Other revenues beat by ~8%, and Client Incentives beat by ~1%); 2) Nominal international revenue ~13pt gap vs. cross-border volume growth (vs. ~6pt gap in FQ2) on FX volatility and pricing; 3) US CNP volume ex-travel at 170% vs. 2019 consistent with FQ2 (rebounded from May but below April); and 4) Cross-border excl. intra-Europe continued to recover through CQ2 to ~123% of 2019 levels (vs. ~125% in May and ~112% in CQ1), increasing in July MTD to ~129%. Valuation & risks: Our CY 2022E/2023E EPS move to $7.62/$8.75, respectively (vs. prior $7.47/$8.73). $240 target (unchanged) based on ~27.5x CY2023E EPS. Risks are macro (consumption), regulatory, cross-border (travel & eCommerce), M&A, & FX-related. 26 July 2022 Equity Research Americas | United States DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report a