Visa Inc. (NYSE:V) hit an all-time high on Monday after eight straight winning sessions, its longest streak since 2023. The stock is up 4.7% in the past week and 10.7% so far this year. Visa Inc. ranks #3 on our list of the 8 best-performing stock picks by Claude AI, and two other big names hold it too: Bill Ackman and Donald Trump’s investment accounts.
Who Else Owns Visa
Bill Ackman’s Pershing Square Capital Management opened a new Visa stake in the second quarter, according to its 13F filing. The fund holds 3.27 million shares worth about $1.12 billion, or roughly 5.8% of its portfolio. Pershing Square Holdings said in its second-quarter letter that it started the position earlier this year, and its case for Visa’s multi-year growth runway is here.
Trump’s accounts own Visa as well. A disclosure filed in August shows they bought between $1 million and $5 million of the stock on June 18. Later filings show more purchases in July and August, including one worth $250,001 to $500,000 on August 21, and one sale in July. Independent managers make all the trades in those accounts through model portfolios, and Trump plays no role in them, the White House says, according to media reports.
Bull Case: A Fee on Global Spending With No Credit Risk
Visa collects a small fee every time someone pays over its network, and the banks that issue the cards take the credit losses. That gives the company high margins and steady growth that follows global spending. Revenue grew 14.39% year over year in the recently reported quarter, and the shift from cash to cards and phones should keep payment volumes rising. Montaka Global Investments looks for businesses with lasting advantages and highlighted Visa in its second-quarter letter. Read why it asks if Visa is an overlooked opportunity.
Bear Case: Governments Are Building Their Own Payment Systems
About 60% of Visa’s revenue comes from outside the US, and that is where its moat is getting thinner. Visa keeps a gross margin near 98% and a net margin near 51%, and margins that high give rivals a reason to undercut it. Governments now run payment systems of their own and treat them as public infrastructure. Brazil’s central bank launched Pix in 2020, and the IMF says about 80% of Brazilian adults used it within 30 months. Pix costs merchants 0.33% of a payment, against 2.34% for credit cards. India’s UPI handles about half of the world’s real-time payment transactions.
Those systems are domestic, and Visa’s real strength is moving money across borders. The risk is that governments link them together. Canada and the EU plan to work on connecting next-generation payment systems for cross-border payments, according to a draft joint statement the Globe and Mail reported. Both see US control of payment networks as a risk after the US sanctioned an International Criminal Court judge, who then could not use most credit cards. Stablecoins and tech platforms such as Google and Apple could also take a share of the fees.
The risk exists at home too. Trump endorsed the Credit Card Competition Act in January. The bill would require large banks to let their credit cards run on at least two unaffiliated networks, one of them outside Visa and Mastercard. He also called for a 10% cap on credit card interest rates for one year. Dodge & Cox Stock Fund bought Visa in the second quarter and said regulatory worries, including proposed caps on credit card interest rates and fees, weigh on the shares. See why it still bought the stock.
Pixabay/Public Domain
Valuation
Visa trades at about 29 times forward earnings. That is close to its five-year average of 27.8 and 169% above the sector median of 10.8. Revenue grew 14.39% year over year, and analysts expect earnings per share to grow about 14% over the next year. Its forward PEG ratio is 2.00, against a sector median of 1.02 and a five-year average of 1.95.
While we acknowledge the risk and potential of V as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than V and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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