Q1 Updates For Visa, Chipotle, and ServiceNow

With Q4 / fiscal year reports always delayed, the gap between those and Q1 reports always seems really short. And here we are already, back into Q1 earnings season! We have our first batch of reports to cover today, so let’s get into it.

Visa (V) Q1

Visa is a great example of our "set it and forget it" approach, because the firm is just so steady and predictable. In a set of results reminiscent of pretty much every quarter over the past 3 years, Visa delivered 10% revenue growth on the back of 8% growth in payments volume and 16% growth in cross-border volume. Transactions processed were up 11%. Share repurchases totaled 9.7 million shares at a below-value price of $280.80 ($2.7 billion in buybacks, reducing share count 2.6% from last year). A hefty $23.6 billion remains on the current buyback authorization.

Visa’s results prove that the global consumer continues to spend at a healthy clip - good news for nearly everyone in business. The company continues to perform right on-model. The fair value gets just a slight bump up to $327 (from $323). Trading at $275, the stock represents a pretty good value at present.

Chipotle (CMG) Q1

Watch List stock Chipotle continues to deliver impressive results, showing a restaurant brand that is as strong as ever. Revenue increased 14% on the back of a 7% same-store sales increase combined with 47 new locations. Margins were particularly high, with a 27.5% gross margin representing one of its best profitability quarters ever. Nothing much to complain about in the results.

For the year, Chipotle is still planning on 285-315 new restaurant openings, with comparable store sales rising in the "mid-to-high single digit range". Longer-term, CEO Brian Niccol still sees an opportunity to double business in North America and expand substantially overseas, something Chipotle has never been able to successfully achieve. I’m raising the fair value to $1,614 from $1,598, but the stock is trading way, way over that right now. Best to wait for a better entry point.

ServiceNow (NOW) Q1

Like Visa, ServiceNow is one of those positions you can more or less just buy and hold. Q1 results were strong. Subscription sales grew 24%, backlog was up 21%, and the firm continues to increase its hold on larger, stickier customers, with transactions over $5 million doubling from last year, and 15% growth in customers spending over a million annually. ServiceNow continues to roll out AI-based features to support its many use cases, and continues to win prestigious awards, including a spot on Fortune’s Most Admired Companies list and 100 Best Companies to Work For. An excellent company, indeed, and clearly a core holding for any portfolio.

Results were slightly above my modeling, and some tweaking upwards of both growth and profitability expectations lead to a nice bump in fair value to $696 from a previous $619. With the market responding somewhat negatively to the results (surprisingly), ServiceNow trades just slightly above the new target. Keep an eye on this one for buying opportunities!