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Why Visa Stock Stayed Flat in 2021

The Motley Fool logo The Motley Fool 1/10/2022 Jennifer Saibil

What happened

If you're a Visa (NYSE: V) shareholder, 2021 had no drama for you (at least on that count). The superstar credit-card processing company's stock lost a mere 0.9% in 2021, not blowing anyone's net worth, but severely lagging the S&P 500's 27% increase over the same time.

V © YCharts V

The year started out with difficulty, as shoppers were still putting big purchases on hold. And while Visa's sales roared back by the end of the year, the world is still in economic turmoil, with inflation and supply chain issues causing general fears about the economy.

So what

Visa made up for sales declines early in the year with a strong showing in the third and fourth quarters, growing 27% and 29% year over year, respectively. It gained a full 10% year over year in fiscal 2021 revenue (covering the period ended Sept. 30), rounding out the year with a bang, and $3 billion more than it ended 2020 with.

Visa typically cruises to increased revenue, as its business mirrors the economy. During an expanding economy, people spend more, and Visa takes its cut. It's a no-brainer model, and as the population grows, so does Visa's addressable market, which is pretty much anyone who needs to go to the grocery store to buy a container of milk.

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More of the world is also becoming cashless, and Visa's right there with them, teaming up with tech partners to offer all sorts of digital solutions for its customers. It's made several acquisitions over the past year and forged several partnerships to stay on the cutting edge, and the pandemic has brought more people online and away from cash, feeding into Visa's business. 

However, the pandemic has also roiled the economy worldwide, and anytime investors get nervous about the economy, Visa usually receives some backlash. So while the stock gained 12% in December, it's down a drop so far in 2022. The omicron variant has affected millions more people and sent a large portion of the workforce home, which means the economy is suffering, again.

Now what

The current state of the economy doesn't really shed any light on Visa's future. It's a great stock to own, although shareholders may have to weather some dips when the economy is down. It's gained 165% over the past five years, outdoing the S&P 500, and should continue to do so for the foreseeable future. It trades at a cheap 19 times trailing-12-month earnings, and it's a great value addition to anyone's portfolio.


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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool owns and recommends Visa. The Motley Fool has a disclosure policy.


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