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Visa's Coronavirus Sell-Off May Be Overblown

Mar. 04, 2020 1:02 PM ETVisa Inc. (V)32 Comments


  • Visa pre-announced its fiscal second quarter.
  • The pre-announcement doesn't add up the impact on the stock.
  • Traders appear to be betting the stock rises sharply by June.
  • Looking for more stock ideas like this one? Get them exclusively at Reading The Markets. Get started today »

Visa (NYSE:V) shares have been hammered during this coronavirus led stock market sell-off. But the sharp declines may not be justified based on the current changes in fiscal second-quarter guidance the company issued the other day. The revenue adjustment seems minuscule when compared to the more than $50 billion loss in market value.

Some options traders are betting that Visa's stock rebounds by the middle of June, suggesting that the stock rises to around $211 from its current price of about $188. You can now track all of my free articles on Seeking Alpha on this Google Spreadsheet I have created.


Visa announced on March 2 that it would not meet its prior revenue guidance and instead saw growth being below its previous guidance by 2.5 to 3.5 percentage points. The company had been looking for growth in the low double digits and modestly better than the fiscal first quarter. More importantly, analysts had been looking for the company to have revenue of $6.11 billion in the second quarter. Since the pre-announcement, analysts have adjusted their revenue estimates to $5.99 billion. In essence, revenue estimates for the quarter have fallen by just 1.8%.

Meanwhile, revenue estimates for the year have fallen by 70 basis points since their peak at that end of January to $25.3 billion.

If you are wondering how this minimal impact on the company's revenue has resulted in the stock's market cap declining by more than $50 billion, it is an excellent question. It is likely the reason why some traders are betting that the shares rebound by the summer.

Betting Shares Rise

The calls for expiration on June 19 increased by almost 9,000 contracts at the $205 strike price on March 3. According to the data from Trade Alert, the calls were bought on the ASK for about $5.50

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I first fell in love with the stock market when I was 16 years. Now, 25 years later and after a long career as a buy-side trader, I share all of my experience with you daily with timely thoughts throughout the day in Reading The Markets. I use fundamental, technical, and options market analysis to identify individual stock ideas for you.

This article was written by

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Designed for investors looking to stay ahead of the pack.

I am Michael Kramer, the founder of Mott Capital Management and creator of Reading The Markets, an SA Marketplace service. I focus on long-only macro themes and trends, look for long-term thematic growth investments, and use options data to find unusual activity.

I use my over 25 years of experience as a buy-side trader, analyst, and portfolio manager, to explain the twists and turns of the stock market and where it may be heading next. Additionally, I use data from top vendors to formulate my analysis, including sell-side analyst estimates and research, newsfeeds, in-depth options data, and gamma levels. 

Analyst’s Disclosure: I am/we are long V. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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