Visa (NYSE:V) may have cut its forward looking guidance recently but this has more to do with global economic weakness as opposed to the company’s fundamentals. In fact, Visa still pulled in $1.7 billion in GAAP net earnings despite having to deal with worsening economic conditions in China and Brazil. Furthermore with the dollar index going from around the 80 mark in July 2014 to presently well over 94, Visa has still been able to grow on a constant dollar basis which many other US multinationals have been unable to do over the last 24 months or so.  This is what investors need to understand. Even with the dollar index well over 90, Visa still expects to achieve revenue growth of around 8% for the full fiscal year taking into account the strength of the US dollar. I believe this could come in even better with 2017 then following with double digit growth levels.

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Firstly and I have written about this in previous articles, I believe the bull market we have had in the dollar index since July 2014 is over. If we look at a weekly chart, we can see that the index is now making lower lows which almost always means lower highs are on the horizon. However an intermediate bottom in all probability was printed last week and intermediate cycles in this currency usually last about 20 weeks. This means we should see the dollar strengthening temporarily (bear market rally) but I don’t envisage any new highs. In fact, I think the best it will do will be to touch the trend line I have drawn which would be around the 98 level but that should be where the index rolls over once more. Watch the weekly stochastics because when they are overbought, it usually is a signal of an impending daily cycle top

So what does this mean for Visa? Well, nominal payment volume growth is only averaging around 6% at the moment but expect this to get to double digits when the dollar starts to turn over in earnest. This is why the stock still isn’t expensive with its current price to earnings ratio of 27+ and could easily trade with an earnings multiple north of 30 in the quarters and years to come.