Visa Slashes Q2 Revenue Outlook By 2.5-3.5% On Lower Asia Travel; Microchip Pulls Guidance

With stocks desperate to put the coronavirus crisis behind them, and pretend as if the earnings impact will be non-existant, moments ago the world’s largest payments processor, Visa, joined the guide-down crew including its competitor Mastercard which cut guidance just last week, when it announced that it now sees 2Q net revenue growth to be about 2.5% to 3.5% percentage points lower than the outlook shared just one month ago, on January 30.

In an announcement after the close, Visa said that “cross-border growth rates have deteriorated week by week since the coronavirus outbreak in China, and trends through February 28, 2020 do not yet fully reflect the impact of the coronavirus spreading outside of Asia.” As a result, Visa anticipates “that this deteriorating trend has not bottomed out yet.” Full statement below:

“Visa has been actively monitoring the coronavirus, or COVID-19, situation and its impact globally. Our priority has been the safety of our employees, including comprehensive plans to support employee wellness, as well as support for our clients and the communities affected.

Through February 28, 2020, the most significant impact has been on travel to and from Asia. This has resulted in a sharp slowdown of our cross-border business, in particular travel related spending in both card present and card not present. Cross-border eCommerce unrelated to travel has thus far not been significantly impacted, except in some Asian markets. In markets where Visa processes the majority of our transactions, domestic spending growth, both credit and debit, remains largely stable with the exception of some impact in Hong Kong and Singapore.

Cross-border growth rates have deteriorated week by week since the coronavirus outbreak in China, and trends through February 28, 2020 do not yet fully reflect the impact of the coronavirus spreading outside of Asia. As such, we anticipate that this deteriorating trend has not bottomed out yet. Because the situation remains fluid, it is not possible to accurately forecast the growth trend for the rest of our second fiscal quarter or the remainder of fiscal 2020.

Based on trends through the end of February, and assuming some continuing deterioration in March, Visa expects second fiscal quarter net revenue growth to be approximately 2.5-3.5 percentage points lower than the outlook we shared on our January 30, 2020 earnings call.

Given the uncertainty surrounding the magnitude, duration and geographic reach of the coronavirus impact, we will update our views for future quarters and the fiscal full year 2020 on our second quarter earnings call in April.”

Following the news, Visa shares slumped and were trading down about 2% after the close.

And just to make sure investor ire wasn’t targeted on Visa alone, Microchip Technology also pulled the corona card when it announced that it is withdrawing its prior EPS guidance, and now sees 4Q net sales about flat sequentially down sharply from the previous guidance which saw net sales up 2% to up 9%.