Visa Inc., up over 40 percent during the 2013 calendar year, has had a slow start to 2014. Since the start of this year, shares of Visa stock have declined by more than 7 percent, raising concerns for long investors who are looking to generate alpha. Visa is currently trading below both its 20-day and 50-day exponential moving averages, which is a reflection of various recent events.
In late March, Wal-Mart decided to sue Visa Inc. for $5 billion on allegations the credit card company was charging excessively high card swipe fees. These card swipe fees are charged each time a customer uses their credit or debit card. Wal-Mart believes these high fees are not competitive and have negatively impacted sales.
Putting Wal-Mart aside, Visa’s recent declining share price is also a reflection of recent consumer behavior. Consumers have been gradually shrinking their credit card debt. This process is known as “deleveraging” simply meaning that debt is being paid off. However, this is happening at the expense of current spending.
Visa Inc. is expected to release earnings for the second quarter of their fiscal year on April 24. Visa is a company that has historically done well with earnings, beating analyst expectations more times than not in most recent years. As previously stated, Visa is currently trading below both its 20- day and 50-day exponential moving averages. This combined with a current relative strength index (RSI) of 17.38, indicates Visa is currently undervalued. RSI is a momentum indicator that ranges from 0 to 100. As the RSI approaches a value of 30 or below, it is an indication the stock may be oversold. With this being said, upcoming earnings are critical as earnings will further clarify whether this stock is overvalued or undervalued. Visa, currently trading around $207 a share has room to grow since it was trading above $235 a share just a few months ago.
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