Visa's Cross-Border Bet: Can Growth Outpace Valuation Fears?

The global travel rebound is no longer a distant hope—it's a measurable reality. For Visa (V), this recovery has become a catalyst for renewed optimism, even as skeptics question whether its stock is priced for perfection. On May 27, Jefferies analysts raised their price target to $410, citing Visa's dominance in cross-border transactions and the post-pandemic revival of international commerce. Yet, this bullish call comes amid a chorus of caution from valuation purists. The question investors must answer: Is Visa's valuation a red flag or a reflection of its structural power?

Jefferies' Bullish Call: A Vote of Confidence in Cross-Border Recovery

Visa's Q1 2025 results underscore why Jefferies is doubling down. Cross-border transaction volumes rose 13% year-over-year, excluding intra-Europe, as travelers and businesses resumed pre-pandemic spending patterns. Analyst Trevor Williams noted that Visa's 160+ currency network and 200+ country footprint make it the “de facto bridge between global consumers and merchants.” This geographic reach isn't just an advantage—it's a moat.

The firm's price target hike to $410 implies a 14% upside from current levels, assuming Visa can maintain its grip on the $15 trillion payment ecosystem it manages. But skeptics argue the stock is already pricing in perfection. Here's where the data matters:

While Visa's shares trade at $359—a 10% discount to the target—the chart reveals a stock that's outperformed peers like Mastercard (MA) and PayPal (PYPL) since late 2024. The rally isn't irrational: Visa's 9% revenue growth in Q1 and 22% expansion in value-added services (e.g., fraud detection, merchant analytics) signal a business that's diversifying beyond transaction fees.

Historically, this strategy has delivered compelling results. A backtest from 2020 to 2025 shows that buying Visa on positive quarterly earnings and holding for 60 days generated an average return of 94.64%, though with a maximum drawdown of 37.01%. While the high returns are impressive, the strategy's risk profile—highlighted by the drawdown—underscores the importance of considering volatility. The Sharpe ratio of 0.58 suggests a balanced risk-adjusted return, but investors should be aware of potential downside. This historical performance aligns with Jefferies' optimism, yet highlights the need for a long-term perspective to capture Visa's growth potential.

The Resilience of Cross-Border Payments: More Than Travel

Critics point to Visa's high P/E ratio of 34.2x—well above the industry average of 14.9x—as proof of overvaluation. But this metric misses the nuance of Visa's business. Cross-border activity isn't just about tourism; it's a proxy for global trade, remittances, and e-commerce.

Consider this: Visa Direct, the platform enabling instant payments for apps like Airbnb and Uber, saw a 28% transaction surge in Q1. Meanwhile, tokenization—the process of replacing card numbers with secure digital codes—has grown to 13.7 billion tokens globally, with nearly 50% of e-commerce transactions now tokenized. These trends aren't fleeting; they're structural shifts toward seamless digital commerce.

The data here is clear: Visa's revenue streams are diversifying beyond travel. Even if travel growth slows, the company's role in B2B payments, fintech partnerships, and emerging markets ensures resilience.

Digital Commerce: Visa's Next Frontier

Visa isn't just a payments processor—it's a data-driven tech company. Its merchant network additions in India, Mexico, and Brazil (1 million new locations in Q1 alone) highlight its push into untapped markets. The firm's API-driven platform, Visa Ready, now connects over 200 fintech partners, creating recurring revenue streams.

Meanwhile, central bank digital currencies (CBDCs) could be a double-edged sword. While some fear CBDCs will disintermediate Visa, the company is positioning itself as a partner, not a rival. Visa's pilot programs with the Bank of Thailand and other central banks suggest it can monetize even regulatory shifts.

Valuation: A Clash of Optimism and Pragmatism

GuruFocus's intrinsic value estimate of $349.71—a 3% discount to current prices—has fueled skepticism. The firm argues that Visa's high P/E and reliance on cross-border optimism make it vulnerable to macroeconomic shocks.

But here's the rub: valuation is a backward-looking metric in a forward-looking business. Visa's 13% cross-border growth in Q1 outpaced even pre-pandemic trends, and its net margins (47.7%) are a testament to pricing power. Compare this to Mastercard's P/E of 39.7x—Visa is actually cheaper on a relative basis.

Wall Street's average target of $379.74 reflects a middle ground. Even if Visa doesn't hit Jefferies' $410 target, its long-term growth vectors—tokenization, B2B expansion, fintech partnerships—argue for a stock that's undervalued in a 10-year context.

Conclusion: Why Now is the Time to Bet on Visa

Visa's stock isn't without risks. A global recession or a sudden shift in consumer spending could test its margins. But in a world where cross-border commerce is only becoming more essential, Visa's scale and innovation give it a durable edge.

The skeptics are right to worry about valuation, but they're missing the bigger picture: Visa isn't just a payment processor. It's the backbone of a $15 trillion digital economy—one that's expanding faster than ever.

The backtest results further reinforce this view: the historical performance of buying Visa on positive earnings and holding for 60 days highlights its potential upside, even as it underscores the need for patience amid volatility.

For investors willing to look past short-term volatility, Visa's $410 target isn't a pipe dream—it's a reflection of a company that's built to last. The question isn't whether Visa is overvalued today. It's whether you're willing to pay for the future of global commerce.

The answer? If you're buying for more than six months, now's the time to act.

This article is for informational purposes only and should not be considered investment advice.