News and analysis

Visa Inc (V) was able to hold only a poor 0.34% of nearly 3.2% initial gains on April 24, in a reaction to a very solid quarterly release. The powerful and penetrating all the corners of the world, the payment card provider recorded its ever-highest EPS (earnings per share) of $2.51 to beat the crowd's average projection of $2.44. Another jump in its business return was achieved on a historically peaked $8.78 billion of revenue from January to March. Most of the crowd decided to "score" and take profit, without even trying to re-test Visa's highs of March above $290 per share.

This sounds unfair to the company which is easily charging each and every payment or transaction on consumer cards, including rent for homeowners, purchasing of food, energy bills etc, but not be limited to, as Visa management continuously diversifying its sources of income by investing in startups, to add to mostly guaranteed and quite predictable card-based revenue. Overall volume of payments climbed by 8% during, while cross-border contribution (without intra-EU calculations) reportedly jumped by 16%. Visa comments showed the company's own public projections for revenue growth in the whole year of 2024 lie "in the low double-digits" as well, while its EPS growth is expected "in the low teens". Well done forecast, which could attract more investing activity with Visa assets in the nearest two or three weeks, if not before this weekend already. It seems to me that only a rather sharp recent correction in several flagship stocks on Wall Street, including chip makers and some megacaps, prevented the market from a more positive manifestation of their hopes for extending the bullish trend in Visa. So, betting on making up money on Visa shares again is now my choice for May and until mid-summer.

Today's complimentary news is that Visa joins AWS (Amazon Web Service) partner network in order to enhance payment services even more. This collaboration will help cross-border solutions, easing global money transfers and multi-currency holdings and integrating all these into AMS customers' existing operations environment, as well as "reducing the challenges faced by financial institutions and enterprises by making Visa's solutions easily accessible on diverse platforms,” according to Vanessa Colella, Global Head of Innovation and Digital Partnerships at Visa. It may enhance cloud-based connectivity by allowing companies to process payments through VisaNet via AWS, with a measure that may be considered as a potential cost-saver for clients who will not need to spend on local data centers and specialized payment hardware. Startups enrolled in Visa's Fintech Fast Track program can receive up to $100,000 in AWS Activate credits. This could potentially form a bonus to the existing business scheme of both Visa and Amazon, adding to their market values.

Shares of Meta Platforms (META) plummeted by nearly 15%, from $493.5 at closing time of Wall Street's regular session on Wednesday, April 24, to as low as $418.5 in after-hours trading. Current levels are nominally looking so attractive for purchasing stocks of the giant Facebook and Instagram owner, as prices are surely more reasonable for entering this market after the last three months when Meta was extremely costly for investing. Nevertheless, such a severe form of negative response to solid quarterly results of a mega cap company makes us think about the feasibility of taking extra time for probably a better, or at least a more risk-balanced decision, as even lower prices may appear in May. So, simply watching the further dynamics seems to be a rational choice in a rather mixed and complicated environment.

The problem actually was that a substantially better-than-expected EPS number of $4.71 per share, compared with $4.32 per share in analyst poll forecasts, provided a more than 9% advantage against average projections and also impressively doubled Q1 2023 EPS of $2.20. In a normal frame of market minds, this would protect the company's value from an excessively large drop, even though some softer updated guidance for the rest of the year. Another positive thing was that a much better financial return has been squeezed from growing revenue as well, but the pace of revenue rise (less than 1% vs expectations and 27% YoY) was more humble than the speed of income growth.

These achievements were driven by more daily active users than expected (amounting to 3.24 billion) and 6% YoY growth in average prices for advertisers. Yet, the crowd and most investment houses were agitated mostly by weaker points this time, pointing to the general anxiety mood related to Meta Platforms at the moment. Meta CEOs praised improving its advertisement products with AI tools like a last generation chat assistant and Llama 3, an open-source large language model that is designed as a ChatGPT competitor, while Reels (short video) formats also helped a lot in attracting customers, yet those inspiring remarks were mostly ignored by the market. At the same time, Meta was declared "guilty" enough for a tough sold-off due to the company's guidance for total revenue within the range of $36.5 billion to $39 billion for Q2 2024, meaning $37.75 billion at the midpoint to miss average analyst bets on $38.3 billion. Compared to about $36.5 billion in Q1 2024 and $32 billion in Q2 2023, Meta projections were not so sad.

Another "fault" in Meta guidance was that its full-year capital expenditures for 2024 were up from a previously estimated range of $30 billion to $37 billion, now reaching $35 billion to $40 billion. Following only $28 billion spent during a "year of efficiency", proclaimed in 2023, Meta commented it would continue to accelerate its infrastructure investments to support an "artificial intelligence roadmap". A planned increase in spending on generative artificial intelligence features, which is perceived as a boon for many other companies, is somehow interpreted in a different manner by investors for Meta, which is apparently expected to take a more economizing approach.

Meta founder Mark Zuckerberg, who backed all strict cost-cutting measures in 2023, including massive employees lay off, also said that increased investments into AI chips and big data processing are necessary for Meta to become "the leading AI company in the world". Yet, the analysts group at Goldman Sachs argued that "such a narrative results in a slight reduction in forward revenue trends'', while experts at Stifel emphasised in a client's note that the "biggest question" is whether Meta can "meaningfully monetize AI over time to justify the investment cycle".

The current intonation of many comments also shows large funds are more eager to believe in chip producers like NVidia and creators of the AI tools like Microsoft and aggregators like Google, than in financial success of pure AI users in the next year or two. The growing competition from other social networks, like Elon Musk's free speech X or China's regional communication platforms, should also be taken into account. That's probably why we are thinking of a more cautious approach to choosing particular price levels before buying Meta shares after the recent drop.

IOTA (IOT) is experiencing a 1.5% decline this week, with its value dropping to $0.2330. Despite efforts, the token couldn't surpass the resistance at $0.250 and regressed to $0.2300. There's a possibility it could further decrease to $0.2000, although its ability to sustain above this level is crucial for any potential upward movement.

Investors are showing some disappointment due to the deteriorating ecosystem of the project, particularly with the significant decline of assets in ShimmerEVM. The Total Value Locked (TVL) has seen a notable drop, plummeting from $13.9 million in 2023 to $3.6 million currently.

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In my assessment, even in a worst-case scenario, I anticipate the pair to follow the support of the channel, providing a level of stability. However, in the event of significant crisis events akin to those seen in 2008 and 2020, I believe the pair could see substantial upward movement.

This strategy resembles a safe-haven call option, where I maintain the position open while paying only for the opportunity it presents.