Visa Keeps Charging Ahead

by: Aidis Zunde May 15, 2008 | about stocks: MA / V    

Aidis Zunde

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Visa (V) continues to do well. It has risen since its IPO at $44 on 19 March to reach a high of $89.94 earlier this month and now trades slightly down from that level. Though the stock is probably not undervalued at its current price of $82.86, it still offers the prospect of steady gains in the long-term. If nothing else, it also seems to be the subject of some strong debate.

At its earnings conference call on April 28th, Visa reported a 48% increase in net income for the first quarter of 2008. Quarterly earnings per share were $0.39, or $0.52 when adjusted to exclude litigation, restructuring, and purchase amortization. Payment volume grew to $681 billion, 19% over the prior year. For the six months ending March 31, 2008, earnings per share were $0.93, or $1.08 when similarly adjusted. Visa indicated that it expects annual revenues to grow 11-15% over the next three years, with operating margins running at around 40%. Earnings per share should grow at 20% or greater. Annual free cash flow should exceed $1 billion.

After some mixed trading following the earnings announcement, Visa shares resumed their upward trend; they have only recently pulled back a little.

At its most recent closing price, Visa is trading at a rich forward P/E of 40.8 on average earnings estimates of $2.03 per share in 2008 and 32.8 on estimates of $2.53 per share in 2009. Earnings, according to the average of analyst estimates, are projected to grow 24% in the next year and something over 20% annually for the next five. It has a fairly solid profit margin of almost 22% in the most recent quarter, above the industry average. How does this compare to Mastercard (MA)? The latter has a forward P/E for 2008 of 33.2 and for 2009 of 27.2. It reported outstanding profits in the last quarter, more than doubling year-on-year quarterly earnings per share, from $1.57 in 1Q 2007 to $3.38 in 1Q 2008. Going forward, its growth may be slightly slower than Visa's -- average estimates are for 22% next year and 19% annually over the next five.

Much of Mastercard's growth came from international markets, all of which exceeded growth rates in the United States. Joseph Saunders (Visa's CEO) emphasized this as a focus for Visa, one which may provide an additional boost to its revenues in the future. Currently, non-US markets provide only 39% of Visa's payments volume (for the 3 months that ended in December); the comparable figure for Mastercard in its most recent report is 55%. Expansion in overseas markets could very likely boost Visa's growth to be more in line with Mastercard's results -- already, as with Mastercard, Visa's year-on-year growth across all foreign markets significantly exceeded domestic growth.

I like both the industry and company; the business model is a strong one, given the secular shift from cash to plastic and the lack of exposure to credit risk. Both Visa and Mastercard have good prospects, though I prefer Visa going forward, based on its market share and its expansion potential into new markets. Management's consideration of a possible share repurchase will not hurt prospects, either.

As my subscribers know, I have owned the stock since the IPO and have added to it since; however, at these levels, I am reluctant to add too much more to my position. I think there will be more opportunities to buy into Visa during the coming weeks and months. Bottom line -- don't rush in wildly, but buy on the pullbacks. You can build your position slowly in this one. At this time, I think any dip into the mid-$70's may be a good point to enter or commit additional funds.

Disclosure: Author owns shares of Visa.

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This article has 32 comments:

  •  
    May 15 03:19 AM
    V would reach $100 next month !
    Reply | Link to Comment
  •  
    May 15 07:04 AM
    IMO, it's already pulled back as far as it's going to. I don't expect to see the 70's again. My guess is that it will trade in the low to mid-80's for a while before plowing through $90. It will probably hold in the 90's for a month or so, and we'll see triple digits by July 4th.
    Reply | Link to Comment
  •  
    May 15 09:43 AM
    First realistic and fair post from SeekingAlpha. Other articles from SA have bashed Visa, and the only thing Visa did was grow more than 45% since then.

    I agree with this post. The forward guidance of Visa is much stronger than that of MA. Visa CURRENTLY is toe to toe with MA and this is without Visa Europe in the mix. Once V europe joins V INC the disparity will be huge. Visa will outshine and outperform MA in every instance. Because Visa had subsidiary (Vcanada, Vasia, Vafrica, Veurope, etc...) I believe they have more of a local/domestic presence which allow more growth potential than MA. Additionally, The upcomming olympics along with the growth potential in Asia (china, india, etc) with major internatinal banks investing milllions of $$$$ in Visa INC, the growth potential is huge and will out-shadow MA in the long run.

    This is one of the most recognized brands in the world. Think about it.... If you go anywhere in the world and ask a regular person on the street what brand they recognize Visa or say Apple, Dell, Exxon, etc..etc.. I guarantee people will say Visa. With the trend going from cash to credit/debit, I cannot think of another company that has better growth potential in the next 10 years than Visa.

    Even at this price Visa is cheap right now. For instance, when you go to a fair or amusement park and your standing in line everything looks big... but once your on the ride and it takes you to the top everything looks small/ tiny below. MEANING: Once this stock is at $150-200, your not going to care whether you bought it at $75 or $84, all you care is that your on the ride and its at $150.
    Reply | Link to Comment
  •  
    May 15 01:44 PM
    Adesai you are right in the LONG run... value and price doesn't really matter sense V will go over 100, so it doesn't matter where to get in and hold as long as you get in below 100 dollars .


    On May 15 09:43 AM Adesai wrote:

    > First realistic and fair post from SeekingAlpha. Other articles from
    > SA have bashed Visa, and the only thing Visa did was grow more than
    > 45% since then.
    >
    > I agree with this post. The forward guidance of Visa is much stronger
    > than that of MA. Visa CURRENTLY is toe to toe with MA and this is
    > without Visa Europe in the mix. Once V europe joins V INC the disparity
    > will be huge. Visa will outshine and outperform MA in every instance.
    > Because Visa had subsidiary (Vcanada, Vasia, Vafrica, Veurope, etc...)
    > I believe they have more of a local/domestic presence which allow
    > more growth potential than MA. Additionally, The upcomming olympics
    > along with the growth potential in Asia (china, india, etc) with
    > major internatinal banks investing milllions of $$$$ in Visa INC,
    > the growth potential is huge and will out-shadow MA in the long run.
    >
    >
    > This is one of the most recognized brands in the world. Think about
    > it.... If you go anywhere in the world and ask a regular person on
    > the street what brand they recognize Visa or say Apple, Dell, Exxon,
    > etc..etc.. I guarantee people will say Visa. With the trend going
    > from cash to credit/debit, I cannot think of another company that
    > has better growth potential in the next 10 years than Visa.
    >
    > Even at this price Visa is cheap right now. For instance, when you
    > go to a fair or amusement park and your standing in line everything
    > looks big... but once your on the ride and it takes you to the top
    > everything looks small/ tiny below. MEANING: Once this stock is
    > at $150-200, your not going to care whether you bought it at $75
    > or $84, all you care is that your on the ride and its at $150.
    Reply | Link to Comment
  •  
    May 15 01:49 PM
    I agree with the earelier comments. Simply put, The new low is around 81.60 anything below that is a great buy. In the long run, Visa will overtake Mastercard . I also believe that after these congressional hearings are over Visa and Mastercard will have to negotiate fees with some of the larger business sectors but once this news is out the stock will drop a week or so and provide us again with a great chance to buy in the high 70's and low- low 80's . I also think that if you buy it today ( 82.38 ) , even these prices will prove you with a great income in 10 years . I figure that it will hit and stay at 100.00 by November 1, 2008 or sooner.
    Reply | Link to Comment
  •  
    May 15 02:05 PM
    SEE everyone we are having a great discussion...and with conversation without disrespecting ANYONE's view...you guys are PRO's
    Reply | Link to Comment
  •  
    May 15 03:01 PM
    What's going on with Visa, why the big drop from a few days ago at $89. I agree it will go $100, and within 12 months possibly $180 to $200.

    Just wondering why it took suck a steep dive. Is it because of the fight going on now regarding the interested charges.
    Reply | Link to Comment
  •  
    May 15 05:22 PM
    I also think it's refreshing to see someone say something positive about Visa! I bought in at 64 and I'm glad I did. I think it's a great investment and an excellent long term play. The recent pullback is nothing more than the day traders deciding that Visa had peeked short term for now and they wanted to cash in. Once all the day traders have been shaken out, the stock should settle in for some steady upward movement. Just be patient. Visa is a no-brainer. I also agree that the stock will crack 100 shortly and move up from there. I see no bad news on the horizon. All the nay-sayers crying about PE ratio are full of crap. If you listen to them, you'll make the same mistake that early investors in Google made. Google had all the same bad-mouthing in the beginning and then went on to hit $700. GO VISA!!!
    Reply | Link to Comment
  •  
    May 15 05:39 PM
    Uh-huh. Right, the stock price of a company has nothing to do with it's earnings? It's got a PE over 50! Mastercard has a PE of 30. And google dropped 20%(it has PE of 40 to put it into perspective). It's like dot com mania all over again, don't people ever learn anything?
    Reply | Link to Comment
  •  
    May 15 05:41 PM
    I keep reading that U.S. consumers are using their credit cards to 'make ends meet' and that there is a coming credit crunch when these consumers will no longer be able to afford their monthly credit card payments.

    How will this credit crunch affect Visa? I own some shares now and am thinking of purchasing more. However, I don't know how this coming credit card 'problem' will affect Visa.

    Any advice, observations or comments would be much appreciated.
    Reply | Link to Comment
  •  
    May 15 06:12 PM
    Distinctive,
    2/3s of US consumers own Visa or MA or both. So there's still more growth in US. Even if the cards are maxed out...the majority of consumers will try to hold on to them (at least make the min payment) because they use them as a DEBT cards too. Both Visa & MA receive transaction fees on debts too.

    The booming economies of most of Asian countries and the 3 South American countries of Brazil, Argentina & Chile will use their credit cards more & more as we started here in the late 70s & early 80s.

    The huge growth for processors of both CREDIT & DEBT is ahead of us. I can't predict the price or the value of the stock but I own it in my core holdings and also calls (Dec08 & Jan09). As soon as we know about Visa Europe then we can calculate the price by using the multiple by earning. Hope this will help.
    Reply | Link to Comment
  •  
    May 15 06:20 PM
    DEBT cards . should be Debit cards

    transaction fees on debts too ... debits too. :)
    Reply | Link to Comment
  •  
    May 15 06:48 PM
    The credit 'crisis' will not affect Visa in the way you're thinking, Distinctive. Visa has nothing to do with the collection of balances from consumers. They are paid whenever a credit card is swiped (i.e., per transaction). When people owe money to their credit cards, or cannot pay, they owe money to the banks that issue the credit card, not Visa, so don't worry. As long as people swipe the card or pay for something using it, Visa rakes it in. All without worrying about who owes what to whom. Visa is not a bank and not a financial. It is an issuer of credit cards. You've made a very wise choice in owning Visa and I encourage you to hang on to it!!

    Reply | Link to Comment
  •  
    May 15 07:53 PM
    Thank you, CatEyes and Torino-t. Much appreciated. I will increase my holdings of Visa.
    Reply | Link to Comment
  •  
    May 15 08:43 PM
    Shove it Shabba. You're a moron and you don't understand English. No one here said "the price of the stock has nothing to do with it's earnings". YOU said that. Visa's PE is currently 36, (not 50, stupid) and Mastercard's is 32, (not 30, dickweed). So the two stocks are FOUR points different in their PE. Big f'ing deal! Google pulled back 20% but not before a whole lot of investors got rich on it! And your lamest comment was "It's like dot com mania all over again" Man, you sound like a light in the loafers, chicken little, the sky is falling nervous wreck. Either that or you must be shorting Visa and worried sick that you made the wrong bet! Go find a stock with a PE ratio of 2 and a trading range of four cents a year and load up on it. What a pussy you are!
    Reply | Link to Comment
  •  
    May 16 02:56 AM
    I ALSO OWN VISA AND AGREE WITH ALL THE COMMENTS.
    FOR THE LONG TERM VISA WILL OUTPERFORM APPLE, ALSO VISA IS IN A LOW RISK MODE COMPARED TO TECH STOCKS.
    I AM A DAY TRADER AND SELL THE STOCK ON ITS HIGH AND BUY IT AGAIN ON A DIP.
    I WILL NEVER LEAVE VISA PERMANENTLY.
    SUPER STOCK TO OWN FOR LONG TERM.
    I AM BULLISH ON EXOM AND BP THE MONEY RIGHT NOW IS RINGING WITH OIL PRODUCERS AND OIL DRILLING COMPANIES HAL AND SLB.
    STAYING THE COURSE. JOSEPH FOSTER USA AND UK.
    PLEASE LET ME HAVE YOUR COMMENTS ALSO LET ME KNOW IF YOU HAVE FOUND A SIMILAR STOCK SUCH AS VISA LOW RISK AND A MONEY MACHINE.
    Reply | Link to Comment
  •  
    May 16 08:53 AM
    You tell him FrankM., tell all those pessimists to stay away from THE "V". For all you OPTIMISTS, just buy the dawn stock and go to sleep, it'll be $200 in no time. Good investing!
    Reply | Link to Comment
  •  
    May 16 01:16 PM
    you are right on and I hope you are right on on on.
    Reply | Link to Comment
  •  
    May 16 05:18 PM
    This is a free board and anyone has the right to post thier opinion whether right or wrong. So Frank foulmouth, can you spell "respect"
    others views without spewing your foul language?
    Reply | Link to Comment
  •  
    May 16 06:06 PM

    >>So Frank foulmouth, can you spell "respect"
    others views without spewing your foul language? <<

    Plantinseeds, can you please rephrase the sentence above so it is intelligible? I think you had a brain freeze and attempted to say two things at once. Anyway, judging by your Christian website, I'd be willing to bet you offend easily. Actually, I thought I let Shabba off pretty easily. I've heard nastier euphemisms than "dickweed" on network television. What I should have said was "Shabba, you are a colossal pillow biter and you can teabag my scrote till my PE ratio comes down."
    By the way, "Plantinseeds&quo... is often used as a slang synonym for having sex. I think you should show some respect for the others on this board and change your handle. I for one, am deeply offended and plan on praying for your soul at the next "Burning Man" brain expansion seminar. Vaya Con Dios!!!

    Reply | Link to Comment
  •  
    May 17 12:01 AM
    I did check it out. It's a good site. "V" OPTIMISTS only allow.
    Reply | Link to Comment
  •  
    May 17 10:55 AM
    YES YOU ARE CORRECT
    VISA WILL GO OVER $100.00 VERY SOON
    START $44.00 - NOW $82.37
    NICE PROFIT FOR THE FEW THAT GOT IN AT $44.00
    AND ALSO THE ONE THAT GO IN ON THE OPEN MARKET AT $59.00
    TKTK53
    Reply | Link to Comment
  •  
    May 19 09:40 PM
    Trust me folks. Everything V Winner has said so far about Visa has come true. I bought a large portion of my Visa holdings at $86 and didn't bat an eye when it dropped. If I had more money to spare I would buy it up on every drop. I personally don't expect this stck to close below $80 ever again. If it does I will pour more money into it that I've been saving for other things. I believe that by the end of summer I lot of people will be cursing at themselves for not buying at the bargain basement price of $100.

    In the meantime I am heading over to this place for a while:
    visawinners.blogspot.c...

    Go there people, you won't regret it.
    Reply | Link to Comment
  •  
    May 20 09:59 PM
    V Winner, you're THE MAN!
    Reply | Link to Comment
  •  
    May 22 10:03 PM
    VWinner, what you think happened to V today? Oouch!
    Reply | Link to Comment
  •  
    May 24 01:51 AM
    Hmm, now I understand why I was booted off VWinners blog.

    I definetly not a 6 or 7 seven figure person. Very low 5 figure :)
    I'm the local trash man that no one gives a hoot about till I don't show up to take your trash.
    But I do own 525 shares of V. And am very lonnnnng on it.
    Ahh I am not very investor savy either....ouch 1 more strike against me.
    Visa winners blog is a good place for Visa info that has been gathered around the net and put in one place.

    I placed a post there that said Visa was in a "holding pattern" for awhile. I said Visa will trade between $77 and $85 for awhile.
    Wow did I get slammed for that. It was not in your mind, a posistive post. And later when I tried to post that it looked like I was right...well It got deleted and I got the boot.

    Vwinner, you use to post on SA all the time. In fact you started Visawinnersblog from SA blog and with only posters from SA.
    Your biggest push on the blog is for all the team to go to every site out there and push your blog so you will have more folks.

    Now here you are ( I have seen you post on every article about V or MA pushing your blog ) slamming people because they like this blog. Or slamming them because they do come to your site but yet they come here too.
    But this slam I like the most, that I am a 5 figure person so I deserve dribble.

    Now since I'm the one you were aiming at about buying on the dips in the $70's ( my post on your blog, unless it has been erased too )
    and since somehow I was not loyal to you ( still have not figured that out ) lets see who was right.

    Visa closed today @ $76.50

    You in your own post here on May 18th stated " tell you to buy on a dip- in this case $75 WHICH WON"T HAPPEN". And my post in visawinners "Holding Pattern" stated $77.

    What about this post you made here on May 17th... Vwinner said:

    "One last thing- and this should let you know what a fine panel of 'experts' Seeking Alpha offers- read his last paragraph

    (any buy on a dip to the mid-70s would be a good time to buy/add)

    GOOD LUCK SEEING 75$- you WILL NOT see 75$ again-In fact, at over 82$- what you will see is about a 5$ pop within the next week (two MAX).

    This is why I can't stand this site- anyone contemplating buying the stock will be left on the sidelines.

    Pro or Con- Seeking Alpha can't get it right."

    I'm sorry Vwinner but I was right.

    With that said I'm not going to try to make you feel like you are spouting dribble, or that somehow by you being on SA is a betrayal to your blog.
    Johnathan, apparently you are a wealthy man, you like being around only those that think like you, have large incomes and like to put others down.
    I on the other hand am poor by your standards. I do not love money. I have to have it to live in this world. I measure no one by how they live, how much they are worth, or where they live.
    I only measure a person on what comes out of their mouth (for most of the time it speaks what is in your heart) and their charcater/actions. My greatest priorities are Jesus, family/friends and country and in that order. As you did question my faith in an e-mail because of my "balanced posts" instead of rah rah rah go visa.
    May you have a very blessed hoiday sir.

    In His Mercy


    Reply | Link to Comment
  •  
    May 25 07:23 PM
    visa is a good buy
    Reply | Link to Comment
  •  
    May 26 12:38 AM
    I may just change my handle from Plantinseeds to Jesus Freak.....Thankyou Johnathan.

    In His Mercy
    Reply | Link to Comment
  •  
    May 27 01:43 AM
    Well Johnathan it looks like the rest of the folks on your site now no you like I do. Apparently you threatened the webmasters life also.
    You need help, please seek mental and spiritual help.

    In His Mercy
    Reply | Link to Comment
  •  
    Jun 05 01:20 PM
    You do not need to be a brain surgeon to figure out Visa stock. You do not have to keep debating over this stock or analyzing it, it's pure and simplistic in form. Look at MA (MasterCard) that's all you need to know. No matter what! Visa will reach MA's levels soon enough, and I believe will surpass it. Buy on the dips if it drops that low agian ($75).
    Reply | Link to Comment
  •  
    Jun 05 01:30 PM
    For all the above RAGGING on each other,

    " Can't we all just get along "
    Reply | Link to Comment
  •  
    Jun 18 10:45 PM
    Here's a link to the Webcast of VISA at the UBS Electronic Payments Summit from June 4, 2008. Elizabeth Buse, Global Head of Product for Visa, is the speaker. The audio is approximately 30 minutes long. It updates Visa's stats and plans for the future we last heard about during the Q2 earnings report.

    For Windows Media Player: events.streamx.us/US/e...

    For Real Media Player:
    events.streamx.us/US/e...

    You all know I value everyone's opinion on these blogs. I'd love to read articles WRITTEN BY YOU, not just your comments on others' articles. So without trying to sound too 'rah rah', I want to again invite you over to visaglobalwinners.blog.../ . Click on the Become a Member link at the upper-right so you can write your own articles and join in the discussions!
    Reply | Link to Comment
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