Visa Q3 Preview: Stablecoins Won’t Disrupt Payment Network

Summary I reiterate a strong buy rating on Visa Inc. with a fair value of $386 per share, despite recent stablecoin concerns. Stablecoins are unlikely to disrupt Visa’s payment network due to its strong infrastructure, adaptability, and consumer preference for credit cards. Visa’s Q2 FY25 results showed robust growth, and ongoing consumer spending trends support continued VZ stock momentum into Q3. Visa’s investments in stablecoin technology position it to benefit from payment innovations, not be threatened by them. I assigned a Strong Buy rating to Visa Inc. ( V ) in April 2025, discussing the trend of consumer spendings. Its stock price pulled back recently due to the concerns about stablecoins. I don’t think stablecoins will become a disruptor for the overall payment market. I reiterate a Strong Buy rating with a fair value of $386 per share. In June 2025, the Wall Street Journal reported that Walmart ( WMT ) and Amazon ( AMZN ) were planning to issue their own stablecoins, to avoid the interchange fee expenses. The news caused tremendous concerns regarding payment companies such as Visa and Mastercard (MA). However, I think stablecoins are unlikely to disrupt the overall payment market for the following reasons. Firstly, Visa offers payment network and earns profits from network access, data validation, and payment processing. While Visa sets the interchange fees, banks, credit card companies, POS vendors and payment processing companies share interchange fees. Visa’s payment networks will remain relevant if they continue to provide service for all kinds of payments including stablecoins. Secondly, stablecoins are essentially another form of deposits from the consumers’ perspective. I think people prefer using credit cards for their spendings. Thinking about this scenario: you convert some cash to stablecoins, then use stablecoins to buy groceries at Walmart. I don’t know what benefits consumers can have. Of course, for Walmart, they don’t need pay interchange fees and save costs. Lastly, indeed, stablecoins are suitable for cross-border money transactions. However, without a centralized hosting network, the cross-border money transactions are more likely to be used for money laundering. I don’t think the central banks will permit these un-hosted stablecoin transactions in the future. In short, I think Visa needs to invest in stablecoin technology and integrate stablecoins as another form of payment within Visa’s payment network. I don’t think Visa’s technology will get disrupted by stablecoins. If the payment network were so easy to pass, PayPal (PAPL) and many Buy Now Pay Later ((BNPL)) fintech companies would have already disrupted Visa. Recently, the Bank for International Settlements ((BIS)) published its Annual Economic Report 2025, arguing stablecoins failed the test for singleness, elasticity and integrity. Visa reported its Q2 FY25 result on April 29 th , delivering 9% net revenue growth and 10% EPS growth, as detailed in the table below: Visa Q2 Result During its call , the management expressed strong confidence in overall consumer spendings, as discussed in my previous article. During a recent conference , Visa mentioned they had worked with crypto and stablecoin companies for many years, and the tokenization technology could become a growth opportunity for the company. Through Visa’s network, stablecoins owners can spend at over 150 million merchant locations around the world, as noted over the conference. Overall, I don’t believe stablecoins will pose any growth threats to Visa. Visa is set to release its Q3 FY25 result on July 29 th , guiding for low doble-digit net revenue and high-teens EPS growth, as detailed in the table below: Visa Q2 Result Recently, several large airline companies, including Delta Air Lines ( DAL ) and United Airlines ( UAL ) have reported their earnings, beating the market expectations. Over the earnings call , Delta Air Lines mentioned the overall demand environment has been stable, similar to the growth trend last year. In addition, the U.S. retails sales have been quite resilient in recent months, as shown by the month-over-month growth in retail sale figures. Census.gov As such, I think Visa will continue its growth momentum in the upcoming quarter. In the near future, I continue to forecast the company will deliver 9.8% total revenue growth rate, comprising 9% organic growth and 80bps contribution from M&A. I assume Visa will spend 2.5% of total revenues toward acquisitions, aligning with historical trends. I predict Visa will deliver 10bps annual margin expansion, driven by 10bps from reduction in SG&A expenses, 10bps from operating leverage and 10bps headwinds due to additional R&D investments in new technologies like stablecoins. The DCF can be summarized as follows: Visa DCF The FCFF is calculated as follows: Visa DCF I set the WACC to be 10% assuming risk free 4.2%; beta 1; equity risk premium 6%; cost of debt 5%; equity $653 billion; debt $20 billion; tax rate 20%. I set the terminal growth to be 5%, aligning with the overall payment market growth. Discounting all the FCFF, the fair value is calculated to be $386 per share, according to my DCF model. Key Risks Due to the tariff disputes, the cross-border activities between the U.S. and Canada have been reduced this year, as noted in Visa’s earnings call . As the two countries are still in the process of tariff negotiations, I don’t anticipate the cross-border volume between them will turn around anytime soon. In addition, if the future CPI rises because of tariffs, consumers might cut back their spendings, which could trigger a weak economic growth and pose some growth challenges to Visa. Summary I think Visa is more likely to benefit from payment innovations like stablecoins, due to its massive payment networks and ongoing investments. The current consumer spendings could support a strong Q3 result, in my view. I reiterate a Strong Buy rating with a fair value of $386 per share.

Source: Seeking Alpha