Visa Approved

  • Market Overview

Market Scorecard

Yesterday, US markets rebounded to pare some of January's losses, the worst month since the onset of the 2020 pandemic. The broader S&P500 retreated 5.8% in January, while the tech-heavy Nasdaq fell 10%. As long-term investors we are used to volatility, it's unavoidable and part of the game, It also brings about great buying opportunities.

In company news, Sony's share price rose 4.5% after the company announced a $3.6 billion buyout of Bungie, the video game developer responsible for titles like Halo, Destiny, and Marathon.

On the final trading day of January, the JSE All-share closed up 1.16%, the S&P 500 increased by 1.89%, and the Nasdaq rose by 3.41%.


Byron's Beats

On Friday, Visa (NYSE: V ) released quarterly results, and the stock surged 10% on the news. The market's reaction says a thousand words. Revenues grew 24%, while net income grew 27% to $4 billion. The growth was thanks to payment volumes increasing 20% and their high margin cross border volume increasing 40%. Travel is coming back.

The Visa share price paints an interesting picture. The stock reached $200 in January 2020. Then Covid hit and it fell with the best of them. But the recovery was quick and by August 2020 the share had surpassed its pre-covid highs.

Soon the market realised how reliant Visa was on cross border transactions, the share price dropped from $246 in July 2021 to $193 in November, as variant after variant ruined holidays around the world. Even despite the large shift towards electronic transactions, Visa missed its high margin cross border swipes.

Now travel is back and most of the shift from cash to card has remained. Visa still finds itself as the back-end service provider for many fintech innovations. Most of the payment applications like PayPal (NASDAQ: PYPL ) and Apple (NASDAQ: AAPL ) Pay still use Visa and Mastercard (NYSE: MA ) to do the switching.

We think Visa is perfectly poised to benefit from a resurgence in travel while still enjoying the tailwinds of a future without cash. At these levels ($225 a share) we rate Visa a strong buy.


Michael's Musings

Last year New York passed a new law requiring companies to disclose a salary band for advertised jobs. The law is part of an effort to reduce pay gaps between different demographics. This is on top of a law that makes it illegal for companies to ask for previous payslips during the interview stage.

Companies are pushing back because they say the new law adds to their admin burden and can be seen as business unfriendly. I can understand why companies want to keep their options open. Also, companies know that keeping salary information on the down low, normally means they have a lower salary bill.

I could see these types of laws being implemented in South Africa too. Locally, due to our high unemployment rate, companies hold most of the cards when it comes to salary negotiations. Having more salary transparency is a good thing in my books.


Bright's Banter

Rapid grocery delivery start-up Zapp has raised $200 million in a funding round led by Lightspeed, 468 Capital, BroadLight and British Formula One driver Sir Lewis Hamilton. Zapp is one of several apps that deliver essential items in 20 minutes max.

Zapp was founded in 2020 by Joe Falter and Navid Javaherian. Its business model is simple, it lets people buy anything, like snacks, drinks, and other essential grocery items from "dark stores." These are adapted from dark kitchens, which simply mean small warehouse outlets set up for the sole purpose of preparing online delivery orders.

Last year, the rapid food delivery start-up opened a massive distribution centre in the heart of London to supply its dark stores with goods. This was an effort to improve its supply chain, ultimately improving customer experience. It is an interesting concept, I wonder if reverse logistics (returns/recalls) work on the same 20-minute timeline.


Signing Off

There's not much action in Asian markets with most of them now shut for Lunar New Year celebrations. However, Japan is open and in the green!

US futures are down in early trade. The Rand is currently trading at around R15.35 to the US Dollar.

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