The Most Expensive Key in Visa’s History Could Open an Empty Room
Visa waited nine years to enter China, and now it’s within reach. Yet the stock barely reacted, and two days later it hit a record anyway. So what is an investor actually buying at 34 times earnings, and what new risk has been added to the portfolio?
Key points
Visa waited nine years to enter China; shares gained less than 1% on the announcement day
Mastercard and American Express operate there through Chinese partners; Visa chose a completely different path
In its annual report, the company itself admits what could happen even after it gets a license in China
The record share price on October 15 had a completely different cause than most investors think
At 34 times earnings, investors are buying something other than what the headline from Beijing suggests
Nine years of waiting, less than 1% of a reaction
Visa $V applied for a license to process domestic card payments in China in August 2017. It took nine years to get an answer on October 13, 2026, and even that is only a halfway step. China’s central bank (PBOC) approved what’s called an application to prepare, not an operating license. The company now has a year to build infrastructure in China, after which it must submit another application, this time for permission to operate.
But there’s one important difference from its competitors. Mastercard $MA and American Express $AXP entered China through joint ventures with Chinese partners. Visa is taking a different route: it wants a wholly owned subsidiary, which would give it control over the technology, operations, and economics of the entire business.
The market’s reaction to the news was polite, not enthusiastic. The stock gained less than 1% on the announcement day and closed at USD 391.43 the following day. It wasn’t until October 15 that it jumped 2.1% to USD 399.75, touching an all-time high of USD 403.21 intraday. But that jump had nothing to do with Beijing: it was driven by higher price targets from Baird (USD 430) and BMO (USD 425), both justified by strong U.S. consumer spending ahead of the October 27 earnings report.
In other words, the market valued the biggest market opening in the company’s history at a few dollars. And that lukewarm applause makes sense.