Innovative Payment Technologies Challenge Traditional Investment Norms
In the realm of investments, a new contender emerges to challenge the status quo, presenting a unique perspective on sustainable profitability. Recent market observations pivot towards a payment company with profit margins akin to industry giant NVIDIA Corporation, yet perceived as a more sustainable investment choice.
Shifting the spotlight from hardware dependency, a financial analyst at Sanlam Investments, Hannah Gooch-Peters, shines a light on the potential overvaluation of NVIDIA’s future sales and profits. This observation was made during a session at CNBC Pro Talks held at the London Business School.
Gooch-Peters questions the sustainability of NVIDIA’s profit margins, given its hardware-centric focus and 75% gross margin. Contrasting the situation, she draws parallels to Visa Inc., known for its 60% operating profit margin and robust “network effect.”
Innovation and adaptability become key themes as Gooch-Peters delves into the core business models of both companies. While NVIDIA’s dominance in the data center GPU market exemplifies USA’s reign in artificial intelligence, Visa’s expanding network of banks, merchants, and consumers underscores its growing indispensability and value proposition, sustaining high profit margins over time.
Within high-quality global equity funds managed by Sanlam, Visa emerges as one of the top ten stock picks, steering assets exceeding $585 million. The company’s stock price has surged by 7% since the beginning of the year, with analysts forecasting a further 9.3% growth over the next 12 months.
Amidst this dynamic landscape, a recent landmark agreement between American merchants and payment giants Visa and Mastercard Inc. unveils a significant industry development. This alliance, marked by a historic $30 billion settlement, signifies a pivotal shift in credit card industry dynamics. The consensus entails interbank fee reductions for credit card transactions in the US, along with transaction fee limits until 2030. Celebrated as a win for merchants and a potential consumer boon, this agreement reshapes the competitive landscape.
In a world where traditional markers of investment success are being redefined, the intersection of finance and technology continues to offer intriguing opportunities for investors seeking sustainable growth prospects.
Frequently Asked Questions
What is a gross margin?
The gross margin represents the percentage of revenue that exceeds the cost of goods sold and is a key indicator of a company’s profitability.
What is the network effect in business?
The network effect describes a phenomenon where the value of a product or service increases as more people use it, creating a positive feedback loop of growth and adoption.
How are profit margins calculated?
Profit margins are calculated as a percentage of revenue and are derived by dividing net profit by total revenue.
Sources:
Sanlam Investments
The source of the article is from the blog shakirabrasil.info