Visa: The Most Successful New Stock in Years? 27 comments
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Visa (NYSE: V), like its main rival MasterCard (NYSE: MA), is not a bank and it does not make loans, assume credit risk or set interest rates on credit cards -- the actual loan is made by the bank or consumer credit firm that issues the card. Rather, Visa simply handles the processing of card payments made with Visa branded cards. Visa derives revenues in two main ways ways: fees charged to merchants every time a payment is processed, and the licensing fees it charges banks for the use of its "Visa" brand.
Visa's main competitive advantage is its size and the widespread acceptance of its cards. Specifically, Visa cards are accepted by more merchants than any other brand, including American Express (NYSE: AXP) and MasterCard.
Visa enjoys a dominant share of global credit card processing volume. Of the roughly $6 trillion in total transactions processed by the six largest payment processing firms in 2006, Visa held a 55% share. That compares to just 32% for its main rival, MasterCard. And in terms of the total number of transactions, Visa held a 60% share in 2006 against MasterCard's 31%. As a result of this dominance, banks want to license the Visa brand and consumers want to hold Visa cards to ensure widespread acceptance.
Going forward, Visa should continue to benefit from two main catalysts: the overall increase in the use of electronic payments and strong growth in emerging markets. As for the first point, consumers all over the world are increasingly switching from cash and check payments to more convenient credit card and debit card transactions. Electronic payments are simply faster, more secure, and create less paperwork.
And while electronic payments are still growing nicely in the developed world, growth in emerging markets is even more impressive. Consider that due to rapid economic growth in recent years a growing number of consumers in markets like China and India have enough income to take out their first credit cards. In many such countries, consumers are using electronic payments and are foregoing checks entirely. As consumer spending in these rapidly growing economies picks up steam, so will the volume of credit card transactions.
For example, the dollar volume of Visa transactions in the U.S. grew at a +12% annualized pace from 2000 to 2006. However, in Asia and Latin America, transaction volumes grew at +18% and +21%, respectively, over the same time period. According to Visa's registration statement with the SEC, the company expects transaction growth in emerging markets to accelerate and to continue to exceed growth in the developed world through 2012. Visa has been adding new merchants and banks to its network in key emerging markets such as China and India; it is particularly well placed to grow in these markets in the coming years.
Visa's main competitor, MasterCard, has been one of the most successful IPOs of the past few years. And while the stock saw a nice first-day pop, that gain wasn't fleeting -- the stock has soared +380% since the closing bell on its first day of trading.
And Visa is the dominant player in the global payment processing business, so it will benefit even more from the same positive trends as MA.
Disclosure: none
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This article has 27 comments:
"VISA, mastercard, discover, or American Express?"
Most of the time the last two don't even come up when the cashier asks. IMO, jump aboard, it may take the stock two years(as did Mastercard) to reach its settling price. Hang on everyone there are more naysayers than go getters, but stick with your proven knowledge of the stock market and Buy while it is cheap and reap in the profits once it reaches the true potential of this stock.
Actually, Visa does not charge the customer per transaction. The price a consumer pays for a purchase is the same, cash or credit.
And when is the last time you ever saw anyone buy anything with cash on the internet? Plastic will never totally replace cash, but Credit cards are necessary in this day and age.
As far as floats go, Mastercard has 160 million shares floated while Visa has 440 million Class A shares.
Options for Visa are trading right now, but the short interest as percentage of float is very small (I don't think it's even 1%), so no, the shorts are not keeping this stock down. Visa's share price isn't going to change very much until after the first couple quarterly reports come out so investors can better evaluate thie company's performance.
For those of you new to investing I strongly recommend that you do not take 90% of what is said on this site seriously. This site allows people with virtually no real world experience write columns many of which end up on Etrade for all to see. Case is point are the recent negative articles by Joanne Rosen (the two I have seen).
In her first article she claimed that the Visa IPO was just for USA market, which is NOT the case. The only region that is not included currently is the Visa Europe Co.. Asia, South America, and the rest of the world ARE part of V. She had to retract the statement later on in the post. First red flag- she didn't even read the prospectus prior to writing an extremely critical article- thereby leaving out one of the most dramatic claims to growth Visa has- the emerging markets (which have far greater market penetration potential).
In her second article she states that she 'is going to put her money where her mouth is and short Visa". The problem with this article is that an IPO can't be shorted within 30 days. This is a HUGE issue as it outlines her complete lack of knowledge about the market in general, and IPOs and V in particular. Later in the article she then makes the claim that she doesn't know anything about shorting and that this was not what her post was about (after stating that this was what she intended to do in her opening her paragraph ?!). She then goes on to contradict herself yet again by saying that she does not intend to do anything to personally profit from. Reading her post reminded me of how Hillary Clinton's Bosnia story. In short, if you are new to investing - this is not the site to generate anything other than mostly amateur opinions - you would be better off hiring a fortune teller.
Now- My take on V - this is a great stock- but it is not a get-ritch- quick stock. I can virtually assure you that V will easily be worth over $100. by the end of the year. The stock will be worth over $200/250. by the end of next year. Do your homework - the plastic revolution is growing exponentially in the emerging markets- and this will fuel Visa's growth.
Personally, I would be inclined to hold until after 4th Quarter to see what effects the Beijing Olympics will have on Visa.
Let the education begin:
sec.gov/Archives/edgar.../...
Read: PAGES 7,8,9,10,11 - the OFFERING section. The offering section of a prospectus is a summary of the terms of the stock offering itself as well as a description of classes of shares, restricitons, as well as a discussion of restrictions, redemtion rights, lock-ups, dividend policy, voting rights, and other salient facts.
NOW- As far as all those shares SOME of you are worried about:
Straight from the S-1:
"The class B common stock is not transferable until the later of the third anniversary of the closing of this offering and the date on which all of the covered litigation has been finally resolved, which we refer to as the escrow termination date, although our board of directors may make exceptions to this transfer restriction after resolution of all covered litigation.
The class C common stock is not transferable until the third anniversary of the closing of this offering, although our board of directors may make exceptions to this transfer restriction."
What will happen in October!
"We intend to redeem in October 2008 all class C (series II) common stock and 31,853,182 shares of class C (series III) common stock, after which all remaining class C (series III) and class C (series IV) common stock will automatically convert into class C (series I) common stock on a one-to-one basis. Following these redemptions, the holders of our class A common stock will own an approximate 52.5% economic interest in our outstanding capital stock. These redemptions will also not generally affect voting power due to the limited voting rights of our class B and class C common stock. "-
The only reason Visa Europe was not part of the offering is that Visa International (V)- wants to settle with the EU- which they are in the process of doing- and THEN roll Visa Europe back into V- this will come right after the Olympics - and will produce another huge jolt to the stock value.
Conversion rights are NOT one for one- on B shares:
"after giving effect to the application of the proceeds of this offering the conversion rate applicable to each share of class B common stock will be 0.74 shares of class A common stock per share of class B common stock"
Classes of Stock- These are MEMBER BANKS and VISA DIVISIONS- they are NONT going to canabilize their own assets:
"Class A common stock is being offered to the public pursuant to this prospectus. Class B common stock is held by financial institution customers that are members of Visa U.S.A. Class C (series I) common stock is held by financial institution customers that are associated with Visa Canada and our AP, LAC and CEMEA regions. Class C (series II, III and IV) common stock is held by Visa Europe."
Why different Classes: TO PROTECT THE COMPANY AND ITS SHAREHOLDERS:
"We created a multi-class structure in order to: (i) allow stockholder decisions generally to be made by, and a majority of our board of directors to consist of independent directors elected by, our class A stockholders and not by our financial institution customers that hold our class B and class C common stock; and (ii) implement a key principle of the retrospective responsibility plan, which is that liability for certain litigation, which we refer to as the covered litigation, would remain with the members of Visa U.S.A., as holders of our class B common stock through adjustments to the conversion rate for such stock."
Class A common stock is being offered to the public pursuant to this prospectus. Class B common stock is held by financial institution customers that are members of Visa U.S.A. Class C (series I) common stock is held by financial institution customers that are associated with Visa Canada and our AP, LAC and CEMEA regions. Class C (series II, III and IV) common stock is held by Visa Europe."
Why am I doing this :
I am an investor- not a day trader- I DO WANT VISA TO GROW- and I am sick of listening to some (there are many intelligent posters)- dispell nonsense. Yes there are a lot of shares out- but many of those will be used to control the member banks and V Euro- and most will not be sold- and the ones that are will have buyers before they ever hit the open market (block trades)- The biggest and best banks in the world are also the biggest shareholders-
Class Over......
Need I say-------------------... HUNDRED DOLLA' - NOW THAT WOULD MAKE ME HOLLA'