Visa (NASDAQ:V) has shown the resiliency of it’s ubiquitous digital payment platform during the pandemic, the company Q2 2020 results that were ahead of consensus estimates on revenue and EPS. The stock is flat in after hours trading.

Revenue of $5.85 billion beat consensus of $5.75 billion (2% beat) while EPS of $1.39 beat consensus of $1.35 by 3%. 

Heading into the earnings release analysts had cut earnings estimates by -7% since the beginning of the year as a result of the coronavirus pandemic.

Source: YCharts

Payments volumes grew +5% on a year-over-year basis (YoY), cross-border volumes shrank by -2% YoY, and processed transactions grew +7% YoY.  This is a deceleration compared to Q1 2020 when year-over-year payments volumes, cross-border volume and processed transactions grew +8%, +9% and +11% respectively.

Service revenue stood at $2.62 billion, an increase of 9% YoY. Data processing revenue was $2.7 billion, up 11% YoY.  International revenue was $1.8 billion, up 2% YoY.

The company noted that COVID-19 impacted both card present and card not present cross-border travel related spending – noting sharp declines week on week in volume and transactions trends in the latter part of March.

The following graphic illustrates the weekly evolution of U.S. Payments Volume Growth.

Source: Visa

Visa’s quarterly year-over-year revenue growth has lagged that of Mastercard over the last 4 years.

Quarterly YoY Revenue Growth

Source: YCharts

However we believe the Visa offers investors more value relative to Mastercard, on a forward P/E basis Visa is 10% cheaper.

Visa Cheaper that Mastercard on a Forward PE Basis

Source: YCharts

Additionally Visa’s operating margin has consistently been over 10% higher than Mastercard.

Visa’s Superior Operating Margins vs. Mastercard

Source: YCharts

Both Visa and Mastercard have lagged their technology peers YTD, underperfoming the Nasdaq 100 by -8% and -10% respectively. We believe the long term thesis is still fundamentally intact and the relative under-performance presents an opportunity for investors.

YTD Performance Relative to Nasdaq 100

Source: YCharts

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