Ca$htag$: Why Visa's Rally Is Backed by Real Consumer Spending

SPEAKER_1 (0:00)

Time now for our Cash Tag Segment. For that, let's bring in our next guest, and that's Megan Brantley, Vice President of Research at LikeFolio today, taking a look at the latest sentiment data on Visa. Past six months have been kind to shares of Visa, but what does your latest sentiment data look like, Megan?

Megan Brantley (0:16)

Yeah, whenever we look at Visa, as you mentioned, it has rallied a bit off of its lows, and we think a lot of this is related to just a bit of a stronger outlook to the consumer than maybe the market was expecting. We've seen some nice signals come in, indicating that the consumer is a bit more resilient, even in August, than maybe many people were expecting. Retail sales look nice, and also when we look at Visa's own momentum gauge, I think that this is really interesting, and this is just a stat that Visa publishes monthly, and you can see that what they're saying basically is that more cardholders are spending more than they were last year. This is flipped over 100 for the first time in quite a few months, in the summer, and also in August. So for us at a high level, when we look at Visa, we think that the best way for us to ingest this is, what does the overall picture of the consumer look like? And we're seeing a bit of resilience, and that's that spending momentum index that I was mentioning. And 100 is kind of that base level above 100 means more cardholders are spending more than they were. Less than 100 is they're spending less than they were a year ago, and you can see a bit of strength there. And we see this mirrored in some Bank of America card spending data for August as well. So for us, we think that this rally lines up with what we're seeing in overall consumer demand when consumers are talking about how much they're spending and where they're spending.

SPEAKER_3 (1:39)

Yeah, Megan, that's kind of what I wanted to highlight with this, talking about this stock, that rally that we had off of those April lows up over 20% from those levels. I mean, this stock got below 300 bucks, and that was at the start of the war, right? But the headwinds that are out there, whether it's geopolitical tensions, rising crude oil prices, inflationary pressures, rising yields, this is kind of why I wanted to hit this and kind of look at your data, which seems pretty positive, that, hey, the consumer's not stopping spending. We saw the revised GDP number today up to 2.2%. That was supposed to be 1.5%.

Retail sales, you mentioned, really good. What's the outlook here, Megan? And do you guys have any data that into the end of the year, it's historically a seasonal strong period for the credit card companies? Is the consumer going to stay resilient? What if we get crude oil back near 70 bucks a barrel? I mean, what happens? What if we get yields to stabilize? And job market remains robust. Do you guys have data that says, hey, the consumer's not going to slow down into the end of the year?

Megan Brantley (2:43)

Yeah, we do not see signs of the consumer slowing down yet to the end of the year. That's for certain. Whenever you look at our just demand data for Visa in particular, we have that demand rising really in a nice pattern along with the stock recently. And so, you know, we see these contrarian indexes. I think that Consumer Sentiment Gauge by University of Michigan came out and consumers are saying, you know, we feel worse than we felt in 12 years. Yet whenever we look at actual spending data, they're still spending, they're still going out to eat, they're still making some retail purchases.

And we see that in our data as well. You know, I analyzed our entire universe to see, okay, what areas of consumer strength do I see? And it's really in alignment there. We see strength in dining. We actually do see a bit of a split in consumers who are saying, you know, I'm actually, if I'm going to spend the money, I'd rather go out to eat versus cook at home. I think that's kind of mirrored in what we track in some grocery stocks as well. But you can see on this chart here that consumer demand rising and really in parallel with how the stock has been recovering. So for us, this is an instance of, I think that there's a lot of potential fear in the market just in terms of what could gas prices be. As you mentioned, there's a lot of unknowns, but at the end of the day, consumers, whenever they actually get to the store and go to the store and are looking around, they are still spending and they're spending more than they were a year ago. So for us, we don't see those headwinds coming into play yet for the consumer, and we actually see some nice signs of improvement through August.