Visa, Inc. (V)

Go to www.secinfo.com and look at Visa's 10k to see where I got the following numbers from:

Valuation:

On page 111 of their 10k they reported Net Income for the following years as...

2005 = $360,445,000

2006 = $454,561,000

2007 = $(1,076,095,000) NET LOSS

However, the 2007 loss was due to hefty litigation charges brought on by the American Express 2.5 Billion dollar lawsuit. Note that there is some evidence that suggest Visa is not done with their litigation charges and part of this IPO was to set money aside for future litigation needs.

For now lets just take the litigation charges out of the equation so we can value the stock based on a best case scenario.

To do this I took the litigation costs out of the 2007 Consolidated Statement of Operations... This gives us the following:

Operating Income = $1,203,335,000

Working it further on down to Net Income, ASSUMING a 35% Income Tax (2005 had 40.18%, 2006 had 34.82%), we get..

Net Income = $817,847,800

So for this valuation we will use the following Net Incomes:

2005 = $360,445,000

2006 = $454,561,000

2007 = $817,847,800 (Adjusted to take out litigation)

Divide Net Income in 2007 by 446,000,000 IPO Shares Outstanding and you get 1.834 EPS.

Use the MasterCard P/E of 25 and your Visa per share value should be $45.85.

* This is determined by multiplying the MA P/E of 25 by the adjusted EPS of 1.834.

At the current price of 64.48 the Visa P/E should be approximately 35.16. That is 40% higher than Master Card.

THIS IS ALL WITHOUT FACTORING IN THE LITIGATION LOSSES!!!

Visa should, by all means, come back to a lower value much closer to it's IPO price.

The good news:

Without litigation Visa had a Net Income increase from 05-06 of 26%. Their increase from 06-07 was 79.92%

So there should be a little extra on top of the stock price to look at future earnings, assuming they aren't already built in based on Master Cards P/E.

Well if you don't know you should. Visa has launched its IPO and the stock is on the market. First day $44.00 to start and at the end of the day $56.50 and that is just the beginning. Mastercard launched last year at $39.00 a share and it stands at over $200.00 a share. It's not everyday that you can get in on the ground floor of the big daddy business but here is your chance. Visa is the power house in the credit card world and is just plain fat in cash. It lives on transactions all over the world from Debit and Credit cards for gas to groceries, paying bills and purchases online Visa will only grow as we move to a cashless society. Keep your eye on this stock it won't be in double digits for very long Visa will exceed Mastercard in the next 6 months to year if not sooner.

Let’s cut the chase. The only two credit card companies worth owning are Visa and MasterCard. One of the main reasons is due to their business model of making money off of transactions and not exposing themselves to credit risks. This is a very important as they are not as directly affected by the inevitable future debt or credit bubble. In addition, historically Visa doesn’t do poorly during a recession. I am bullish on MasterCard, because it is a great stock to own. Visa, however, is better and is best of breed. Do you know what happens to best of breed stocks? They go up. Since Visa very recently had its IPO, however, it doesn’t have the benefit of objective statistics to reflect its present superiority. This requires you to evaluate the stock as a company rather than picking it because through some stock screener.

Before I continue, however, let us get something straight off the bat, Visa is not going to increase 400% like MasterCard. At least not yet. Visa's IPO was being priced to match current Mastercard’s valuation taking into account its 400% increase. The $44 Visa IPO price was actually at a $5 premium over Mastercard's current valuation (true equivalent would have been between $38 and 42). The only reason the Visa's current stock price is so much lower is because it has more shares outstanding. Thus, the likelihood of Visa increasing 400% is roughly the same as Mastercard trading at ~$800 per share. This is unlikely.

Long term, Visa is a great play and a better play than MasterCard, because Visa is significantly larger than MasterCard and has a significant advantage on the US debit card market which is responsible for the most domestic growth. In addition, and more importantly, Visa is being more aggressive in both Asia and Latin America than MasterCard. Also, another important, albeit minor, note is that Visa is the official credit card of the Olympics. Guess how many transactions are going to be made because of the Olympics and who is going to benefit from it most?

Short term, Visa is going to be volatile and its stock is going to fluctuate. It has already touched $69 and may even regress down towards the mid to low 50s. Despite this, it has still increased over 50% from its IPO price and 20% from its opening day secondary market price in less than one month. This is very good for a stock not in the energy or commodities sector.

The analysts that are bearish on Visa tend to focus on short term gains and point to the fact that MasterCard is cheaper and therefore a better buy. I don’t find their argument persuasive because:

(1) Although one stock may outperform the other, the success of both Visa and MasterCard is not mutually exclusive (e.g., the credit card pie itself is getting larger and both V and MA are outperforming the other competitors). Accordingly, I am bullish with both V and MA.

(2) Those bearish on Visa and bullish on MasterCard, such as Jim Cramer (which, statistically, is wrong 52% of the time) have watched from the sidelines as Visa’s oscillating stock price has statistically doubled MasterCard performance in the short term and this is a long term stock.

(3) Those bullish on Visa since day one had the chance to buy Visa at $55.00 within hours of it opening and if they held it until now they would have about a $25% gain. Bearish analysts, such as on Fast Money, were bearish on Visa and so missed the opportunity and think they are smart by recommending to wait for a pullback from its current high 60s price to a mid 50s price before you buy. So, at the end, the person who is bullish on Visa has a 25% gain and the person who is bearish is hoping that the stock will drop 25% so that he could purchase it for the price he could have gotten since day 1 and was bearish about at that time. If the Visa stock never drops for the bearish investor, he is out of luck and missed an opportunity.

(4) Visa is best of breed and has much better growth.

(5) Many of the same analysts recommended Yahoo over Google for the same reasons when Google was going public. We all know how that turned out.

Overall, you have to look at the upside vs. the downside. Could it dip to the IPO price, yes, that is possible. However you are taking a risk and assuming that it is going to dip to that level. What if that never happens? Then you let an opportunity go by, because you were greedy. Even if it dips back towards the IPO price (let’s say after Visa’s quarterly earnings or as more analysts cover the stock), how much do you think the stock is going to be worth in, for example, three years? We know the stock is going to go up by a lot over the long term, but we are not as confident that it will go down. Thus, the best investment strategy would have been to get in on the IPO ($44), or bought it within the first few hours of trading ($55 to $59.50) and just hold it for years.

VISA IPO is awesomely priced. Think about it, Mastercard's IPO i 2006 was for $39 as hasre and had under 1 billion card holders, with half the transactions of VISA. Now if you include inflation, that makes it 0.94 dollars*44= 2006 value, $41.36, just 2$ more for double the transactions, $3.1 trillion in processing and $5 billion in revenue. No question, the worlds largest credit card will enjoy nice profits and if it follows its rival company Mastercards stock, you should see massive gains.

Company's current market position:

*As on September 30, 2007, Customers of "Visa" (mainly financial institutions) had issued 1.5 billion cards carrying it's brands. In other words, currently nearly 1.5 billion cards carrying Visa's symbol are under circulation the world over.
*Visa-branded cards are accepted in more than 170 countries around the world.
*Company has shown nearly 76% growth in revenues and nearly 107% growth in net income in the quarter ended Dec. 2007 as compared to the quarter ended Dec. 2006.

Valuation/Offer value:
*At offer price of $39.50, Company's shares are available at PE of nearly 19 (annualizing first quarter FY 2008 adjusted net profit)

Bottom line: Great company, good growth as ecommerce expands, gets in on foreign countries growth and has a nice PE.

62.83... thanks for the pump today... heading back to its IPO price.

Come on. When do you not use Visa? It's everywhere you want to be, right?

As if I didn't have enough financial companies in my portfolio... but this one is a no-brainer.

Visa is an extremely well known American company long overdue for its debut on Wall Street. Since its recent IPO, the stock has soared so far. The leader in the industry, Visa makes money on most transactions and increasingly more people are using cards today as we move away from cash. People are using credit cards for more things today than they used to not only for things like gas and groceries, but also for paying their bills, car payments, insurance, you name it -- and Visa only stands to make money from it. As this tumultuous market continues, expect to see a pull-back or two, but in the long run this stock will climb just as Master Card did. This is definitely a long term hold. Get ready to make money.

Visa! I've been awaiting this IPO for quite some time now.

Visa has an incredible market with the expansion of online shopping and increasing wealth in third world countries. Best part: There's no exposure to the credit crisis! Visa racks up the dinero on a per transaction basis. As long as people are buying food, gas... ANYTHING, the cash train keeps on rolling!

Love it.

Long term trend - cashless society. I haven't had a Mastercard in a long time and have never bothered to sign up for American Express. Discover seems lame. Visa is the clear leader in a space with few players. Additionally, defaults mean squat to them. They simply provide the infrastructure. They get paid by the swipe!

VISA is almost a sure thing. There is a definite trend in using plastic instead of cash. It's safer, more convenient, and it's easier to track spending. Although VISA is opened by large financial institutions, it's not directly affected by the subprime mortgage mess because it's a middleman. It charges a percentage of each transaction made with it's card. With the increasing number of people making purchases on the internet, VISA and Mastercard will both reap the benefits.

Unlike Master Card Visa does not issue debt. They are only a processor. Even with the current credit crunch people are inclined to use more and more credit. Our technology is headed to people earning rewards everytime they use their credit cards/debit cards. I am in the merchant services business and I have to tell you that electronic transactions are here to stay, and with Visa not having any risk associated with everytime someone uses their logo this companys costs remain with their employees and advertising.

Will be at $200 plus in two years, that's why I have 200 shares. The thirty something generation was brought up using these cards and our younger siblings and our kids will do the same.

Visa is the leader in its industry and who wouldn't want to buy in to a new ipo company at its beggining. Especially one as established as visa.

Think about this how much would your stock be worth today if you invested when microsoft first became public.

There's a lot of reasons to like Visa. Compare the current price of Visa to the current price of Mastercard and you've got to like the chances for growth. Additionally, a significant chunk of Visa's income comes not from issuing credit, but rather from processing fees. This helps to insulate them from the credit crisis, and since they can control the fees, they can adjust them to ensure a profit even in a bad economy. As plastic becomes more and more common, Visa will just make more and more from processing fees. Additionally, they are a worldwide powerhouse with a recognizable brand, which is one of Warren Buffet's key requirements for a great stock.

4 times as much outstanding stock as Mastercard and less than 2 times the market cap. predictions are a tad overzealous to think this will go above $200 (or $100 for that matter). recent pop in the last few days was due to a 10% stock buyback. fact or the matter is Visa has several large contingent liabilities due to lawsuits on their balance sheet. approximately 1/6 of their IPO profits are reserved to pay these suits in the event they lose. IMHO stock is slightly overvalued at this time. bear in mind also that there are significant world economic problems at this time. less money means less swipes hence less money for visa and less of an increase in in your stock price.

Increased growth of credit usage in emerging economies, and in particular BRIC countries, will drive growth. It generates its revenue from data processing and service fees, which should continue to grow as the world becomes more and more electronic (versus cash based).

This is an IPO for a solid company in unsettling times. I think there is potential to do well. Given the track record of IPO's and the fact that consumer debt is not necessarily their main course of business.

If you take into account the performance of Mastercard over the last couple of years it's hard to ignore this company. Visa is superior to Mastercard and has a larger marketshare. We're looking at the leader here and leaders don't stay back at IPO prices.

If Mastercard's IPO is any indicator, Visa should outperform. It makes its money even during a downturn in the economy due to the fees it collects when a person uses a card with a Visa logo. So even the debit card swipe at the McDonalds adds to their bottom line