MW Why Visa's stock is pacing Dow gainers en route to its best day in eight months

By Emily Bary

The Fed's interest-rate cut could help turn around a market laggard. BofA sees 'a great business on sale.'

BofA upgraded Visa's stock on Thursday.

Investors see a more robust spending landscape ahead thanks to the Federal Reserve's most recent rate cut, and that is lifting Visa's stock toward its best day since April.

A Bank of America upgrade is helping as well, with the team there flagging various factors that could give new life to depressed payment-technology stocks.

"Tax refunds, lower interest rates and faster GDP growth are positives" for the payments industry generally, BofA's Mihir Bhatia said in a note to clients on Thursday. "The bottom line is: If consumers have jobs, barring extenuating circumstances, they will continue to spend money and pay their bills."

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On Visa (V) specifically, he thinks investors have the chance to own part of "a great business on sale." Visa shares have increased 8% this year, while the S&P 500 SPX has advanced 17%. The underperformance partly reflects concerns that stablecoins could disrupt traditional card-based payment methods, but Bhatia thinks they actually serve as an opportunity for Visa.

"We are skeptical that consumers will shift away from card-based payments to stablecoins en masse given rewards, habits and ease of use of the current model," he wrote. Visa, however, already plays into stablecoin enablement, so he thinks the company is poised to benefit if the technology does start to take off more meaningfully.

Visa's stock is up 5% in Thursday afternoon trading to lead Dow Jones Industrial Average DJIA gainers. The stock is also on course for its largest one-day gain since a 7.8% rally booked on April 9, according to Dow Jones Market Data.

While the company had to make concessions in the latest iteration of a settlement with merchants, Bhatia doesn't think the conditions will mean much financial pain for Visa.

See also: Visa, Mastercard reach new settlement with merchants. Will it shake up credit-card rewards?

For instance, Visa and Mastercard both agreed to terms that would let merchants choose only to accept certain broad classes of credit cards, meaning they could opt not to accept premium consumer cards, which tend to carry higher interchange fees. However, "the near-term financial impact will primarily fall on issuing banks, which earn interchange revenue," Bhatia noted.

He generally views Visa's lagging stock performance this year as "unwarranted" and "disconnected from fundamentals." Bhatia upgraded the stock to buy from neutral in his latest note.

"Visa ranks among the strongest businesses in the S&P 500," he wrote, buoyed by "an industry-leading operating margin" of 67% and double-digit growth in both earnings and revenue.

Yet shares are trading at 22 times forward earnings, or 113% of the S&P 500's multiple on the metric. That's "one of the lowest relative valuations for Visa" in the past decade, he wrote.

More from MarketWatch: How to play payments stocks after essentially their worst run in 15 years

-Emily Bary

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December 11, 2025 13:22 ET (18:22 GMT)

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