Is Visa Stock a Millionaire-Maker?
If investors are lucky enough to find the right stocks early on, they could generate some serious wealth given enough time. Visa (NYSE: V) certainly falls into this category, as its shares have produced a total return of 2,560% since their initial public offering in 2008 (as of March 13). A $38,000 investment back then would be worth $1 million today.
The business currently sports a market cap of $644 billion, making it one of the most valuable in the world. As we look ahead, though, is this financial stock a millionaire-maker?
One reason that Visa is a fantastic business is because its competitive position is virtually unassailable. With $4.1 trillion in total payment volume in the last three months of calendar 2024, it has top market share by far in the U.S. with this key metric. This leading position isn't likely to change anytime soon.
That's because Visa is essential to the smooth functioning of the economy. If its payment system went down, just imagine the chaos that would ensue. It's a mission-critical component that helps money flow between banks, consumers, and merchants.
The business also possesses an incredibly powerful network effect. There are 4.7 billion Visa cards accepted at 150 million merchant locations around the globe. The growth of either side immediately makes the entire network more valuable to the other stakeholder group.
If you had access to unlimited capital and whatever other resources you needed, it would still be impossible to create a competing payment platform. To start, you'd need to convince merchants to plug into your system, a tall task given zero historical record of success and the likelihood of there being no cardholders. What's more, you'd need banks to partner with you to issue credit cards, which also seems unlikely since there's no place that people would be able to use these cards.
This points to just how powerful a position Visa has. The platform just works for its stakeholders. This drastically reduces the chance of it being disrupted.
In the past decade, there have been numerous fintech enterprises that have found success. However, a valid argument can be made that they actually help accelerate the adoption of digital transactions at the expense of cash and paper-based methods, which supports Visa's success.
Visa can be considered a capital-light compounder. In other words, it requires almost no capital expenditures to grow. That's because the technological infrastructure to process transactions is already built out.
