Consumers are slowly getting back to the skies, but it’s not fast enough for Visa Inc.
While overseas spending on the firm’s cards jumped 38% during the firm’s fiscal fourth quarter, a bigger increase than analysts were anticipating, the firm warned that widespread border closures are still a hindrance. Cross-border travel likely won’t reach pre-pandemic levels until the summer of 2023, said Chief Financial Officer Vasant Prabhu.
“Cross-border travel is recovering well, but it’s still well below pre-Covid levels, with the pace of recovery depending on border openings,” Prabhu said Tuesday on a conference call with analysts. “Covid variants are still with us and vaccination rates remain low in large parts of the globe. With these factors as the backdrop, forecasting the trajectory of the return to normalcy remains difficult.”
Cross-border transactions are especially lucrative for Visa because the network can charge higher fees for those purchases. In all, Visa is now assuming revenue in its fiscal year 2022 to climb by a percentage at the “high end of the mid-teens.” Analysts had been expecting a 20% jump.
Visa shares sank as much as 4.1% to $222.22 in extended trading in New York. The stock has climbed 6% this year, compared with the 22% advance of the S&P 500 Information Technology Index.
For its fiscal first quarter, Visa expects revenue to rise by a percentage in the “high teens.” Analysts in a Bloomberg survey forecast a 22% increase.
Governments around the world have begun lifting travel restrictions and vaccines are proliferating in developed markets, allowing consumers to begin traveling again. Excluding the impact of currency swings, overall spending on Visa’s network jumped 17% to $2.78 trillion in the period ended Sept. 30, the company said in a statement. That just missed the $2.79 trillion average of analyst estimates.
Visa said revenue for the quarter ending Sept. 30 rose 29% to $6.6 billion. While that topped estimates, the payments network warned that it will begin spending more on both marketing and technology platforms.
The payments giant set aside a whopping $2.39 billion in incentives and rebates to lure merchants and banks to use the firm’s networks. That was more than the $2.36 billion analysts anticipated.
Net income soared 68% to $3.6 billion in the quarter, or $1.65 a share. Excluding one-time items, Visa said profit was $1.62 a share, which was higher than the $1.54 average of analyst estimates compiled by Bloomberg.
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