Could Buying Visa (V) Today Set You Up for Life?

Visa (NYSE: V), the world's largest card payment network operator, went public at a split-adjusted price of $11 per share on March 19, 2008. Today, it trades at about $300, so a $10,000 investment in its IPO would be worth more than $272,700 today. Let's see why Visa's stock soared -- and if it can generate even more life-changing gains over the next few decades.

Why did Visa's stock rally?

Visa, like its chief competitor Mastercard (NYSE: MA), doesn't issue any of its own cards. It only partners with banks that issue the actual cards and collect the debt. By partnering with a broad range of banks, Visa expands much faster than companies like American Express (NYSE: AXP) -- which operates its own bank and issues its own cards.

Image source: Getty Images.

Visa generates most of its revenue by charging merchants "swipe fees" (usually 1%-3%) every time a customer uses one of its branded cards. Since Visa and Mastercard hold a near-duopoly in branded credit cards, those merchants are willing to pay those fees to serve more customers.

From fiscal 2015 to fiscal 2025 (which ended last September), Visa's revenue and EPS grew at CAGRs of 11% and 12%, respectively. It achieved that steady growth even as the pandemic, inflation, high interest rates, and geopolitical conflicts rattled the global economy. That stability made Visa a reliable evergreen stock for long-term investors.

What challenges does Visa face?

Several merchant groups and government regulators are pressing Visa and Mastercard to reduce their swipe fees. It also faces competition from buy now, pay later (BNPL) platforms, which charge lower fees and reach more customers; account-to-account payment systems (such as FedNow and RTP), which facilitate money transfers without any swipe fees, and digital payment platforms, which could eventually shift away from card-linked payments.

All that pressure could force Visa and Mastercard to slash their fees to placate antitrust regulators and stay competitive. As that pressure intensifies, both companies are trying to grow their market share by securing more banking partners. Visa and Mastercard don't undercut each other's swipe fees to keep growing, but they sometimes offer incentives or value-added services to sweeten the pot.

While Visa is well-positioned to grow as consumers use less cash, its business model isn't bulletproof. Those concerns, along with inflationary headwinds for consumer spending, caused Visa's stock to decline 11% over the past 12 months.

Will Visa's stock set you up for life?

From fiscal 2025 to fiscal 2028, analysts expect Visa's EPS to grow at a 16.5% CAGR. Its stock still looks reasonably valued at 24 times this year's earnings. If it matches those estimates, grows its EPS at a 15% CAGR over the following eight years, and trades at the same multiple, its stock could nearly quadruple to about $1,200 by 2036. It could soar even higher over the following years and deliver some life-changing gains if it overcomes its biggest challenges.

American Express is an advertising partner of Motley Fool Money. Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Mastercard and Visa. The Motley Fool has a disclosure policy.