Author Topic: V - Visa  (Read 39728 times)

Viking

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1454
V - Visa
« on: February 03, 2011, 04:01:20 PM »
Visa is a stock I have begun to build a position in since its drop in Dec.

Dominant, world class brand. Growing, global industry -  electronic payments (+20% for next few years). Very profitable. Lots of moats with few large players and significant barriers to entry. Current issue: US government getting more involved in business - legislating changes to debit payment process = 20% of Visa's business.

For a summary of current business and issues, listen to Q1 results conference call. Bottom line, current CEO feels current regulatory issues are manageable (definitely not happy about things). They continue to buy back lots of stock as they view it as cheap. I expect lots of volatility; looks to me to have nice upside once near term regulatory issues in US are finalized in Congress and Visa communicates plans to maintain growth (they look to have lots of opportunities to grow and will likely shift some focus from US to international). They just reported great Q1 results and are guiding for earnings per share growth in excess of 20% for the coming year.

http://seekingalpha.com/article/250422-visa-ceo-discusses-q1-2011-earnings-call-transcript?source=qp_transcript

Current stock price = $71.63
2010 Earnings (Sept 30 fiscal YE) = $3.91
RBC 2011 Est Earnings = $4.85 = 24% growth vs PY; PE = 14.8
RBC 2012 Est Earnings = $5.80 = 20% growth; PE = 12.4


prunes

  • Lifetime Member
  • Sr. Member
  • *****
  • Posts: 306
Re: V - Visa
« Reply #1 on: February 03, 2011, 05:02:51 PM »
I like this industry potential for global expansion. Not sure how you'd evaluate among the big three though. Why Visa and not MasterCard or Amex? Which has the best international growth prospects?

ericd1

  • Lifetime Member
  • Sr. Member
  • *****
  • Posts: 484
Re: V - Visa
« Reply #2 on: February 03, 2011, 05:18:29 PM »
I like the business model and believe there's an opportunity here, but I have some concerns. First and foremost a disrupting technology and second government regulations. There are credit card like payment concepts floating around silicon valley that use your cellphone and a payment system outside of the majors. Paypal, google checkout, etc who knows what's coming next. We haven't seen the end of government regs either. For now this one is in my too hard pile even though I like Visa

Look at this article - last couple of paras

http://www.businessinsider.com/huge-youll-finally-be-able-to-use-your-iphone-5-and-ipad-2-as-wallets-2011-1
« Last Edit: February 03, 2011, 05:34:15 PM by ericd1 »

Viking

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1454
Re: V - Visa
« Reply #3 on: February 03, 2011, 08:26:07 PM »
ericd1, I agree there are risks. However, I think the speed at which the new technologies hit the mass market will be slower and the moats of the incumbents are misunderstood (and the incumbents are in the best position to partner with any new players). Thanks for posting the article... if you read the first few comments at the bottom of it you also get some counter points that are interesting.

Also, as Mastercard said in their recent release 75% of global transactions are still cash or cheques and is incredibly costly (much more costly than electronic payments). My read is the global pie for electronic payment is growing so fast (and the large companies have such strong moats) that large companies like Visa should continue to grow at a very fast rate for the next few years (even given the risks). This was the sense I got from the Visa CEO when questioned on the Q1 conference call about all the concern regarding potential changes to the debit payment system in the US; they will simply adjust their contracts to re-coup and lost revenue or (with banks), shift consumers into alternative payment systems and shift resources into more profitable endeavours - work, but manageable. Visa also has been working on mobile payment for quite some time and are prepared; the CEO commented (if I remember correctly) that we likely will not see it in a big way in the next year as much needs to be in place to facilitate this transaction (and retailers do not have the $ to keep buying new technology that may quickly become outdated as standards change).

As I continue reading up on the major players in the industry I am coming to better appreciate the size of the moat they have in place. As to picking among the major players I have graviated to Visa as they appear to be the market leader and the cheapest today. I love how much this market is going to grow the next few years.
« Last Edit: February 03, 2011, 08:30:45 PM by Viking »

Viking

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1454
Re: V - Visa
« Reply #4 on: February 04, 2011, 12:31:19 PM »
Here is another (bullish) perspective on Visa & Mastercard that sums recent results and current issues (i.e. Durbin) pretty well: http://seekingalpha.com/article/250941-mastercard-and-visa-profit-on-stronger-consumer-spending?source=yahoo

biaggio

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1200
Re: V - Visa
« Reply #5 on: February 04, 2011, 02:32:23 PM »
Great company.
Seems to be fully valued to me.
Margin of safety=quality of the business + sustainable competitive advantage(moat). No MOS as far as price your paying.

Just playing with the DCf/Fair Value Calculator  on gurufocus which may be naive... I calculate -If you get 8% growth per year in earnings over the next 20 years you'll get at 10% per year yield which is fine (normally I think we would want 15-20% return on investment-that's why I am thinking it is fairly valued.)

tengen

  • Sr. Member
  • ****
  • Posts: 297
US Fed fee cap - higher than expected
« Reply #6 on: June 29, 2011, 05:02:58 PM »
The Fed has capped the interchange fee for debit cards at $0.21 + .05% per transaction, which is well above the original $0.12 proposal. Analysts were expecting the Fed to raise the cap to $0.20 so this is a surprise to the upside (unless you are a merchant who has to pay the fee, of course).

V shares closed up 15%, MA up 11%.

http://finance.yahoo.com/news/Fed-orders-banks-to-lower-apf-2784073239.html

Liberty

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 11070
  • twitter.com/libertyRPF
    • twitter.com/libertyRPF
Re: V - Visa
« Reply #7 on: June 29, 2011, 07:01:11 PM »
Any idea why AXP only went up 2.58%? (I mean, is it Mr. Market just being weird, or is it because AXP makes a smaller % of it's profits from these fees?)
« Last Edit: June 29, 2011, 07:41:38 PM by Liberty »
"Most haystacks don't even have a needle." |  I'm on Twitter  | This podcast episode is a must-listen

rranjan

  • Lifetime Member
  • Sr. Member
  • *****
  • Posts: 347
Re: V - Visa
« Reply #8 on: June 29, 2011, 08:02:24 PM »
Any idea why AXP only went up 2.58%? (I mean, is it Mr. Market just being weird, or is it because AXP makes a smaller % of it's profits from these fees?)

Much smaller.

given2invest

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 565
Re: V - Visa
« Reply #9 on: June 29, 2011, 08:24:44 PM »
When was the last time you've seen am American Express debit card?

Rare.