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Visa Remains More Attractive Than Mastercard Post-Earnings

Apr. 28, 2023 6:57 PM ETVisa Inc. (V), MA29 Comments
Yuval Rotem profile picture
Yuval Rotem


  • Visa and Mastercard operate two of the best businesses in the world, as the duopoly responsible for processing most of the world's transactions.
  • Even after decades of market outperformance and high double-digit growth, the companies have plenty of room for growth, as their new services expand and cash usage continues to decline.
  • Based on the companies' P/E ratios, both trade below their historical valuations, and Mastercard trades at a 19.4% premium over Visa.
  • As I expected, their recent quarterly results proved once again the underlying assumption behind Mastercard's premium is wrong, as both Visa and Mastercard grew at a similar 11% pace.
  • I estimate both stocks will provide market-beating returns, and expect Visa to outperform due to its better margins and similar growth prospects.

Visa Plans Largest IPO In U.S. History

Justin Sullivan

Visa Inc. (NYSE:V) and Mastercard Incorporated (NYSE:MA) are international brands, trusted by billions of people to process their payments all over the world. Even after decades of outperformance and impressive high double-digit growth, I believe there's still

This article was written by

Yuval Rotem profile picture
I aim to invest in companies with perfect qualitative attributes, buy them at a reasonable price based on fundamentals, and hold them forever. I hope to publish articles covering such companies approximately 3 times per week, with extensive quarterly follow-ups and constant updates.I'm an MBA graduate with L.L.B in law and I work as a financial analyst at a large pension fund.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of V either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (29)

Yuval Rotem profile picture
Yuval Rotem
Article Update 29 Apr. 2023
Thanks for reading my article!

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I would love to hear your thoughts / suggestions / questions on the analysis.
Yuval Rotem profile picture
Visa reported May transaction numbers, showing growth remains around high single digits but it is decelerating.

Processed transactions grew by 9% (slowed by 1 percent compared to April).

Yuval Rotem profile picture
@Sleepless@FED Thanks for the comment! Visa has been a Berkshire holding for a long time.
@Yuval Rotem I had no idea BRK owned it.. I guess its such a small position it never gets talked about!
Yuval Rotem profile picture
@Valuestocks007 They actually own it pretty much ever since the IPO. American Express, Mastercard, and Visa are all long-term holdings for Berkshire, however, Visa is a really small percentage of the portfolio, around 0.6%.
Yuval Rotem profile picture
Allow me to refer you to one of the best talks with an executive I've read lately with Visa's Oliver Jenkyn, President of Global Markets.

They discuss in depth and in very simple words Visa's opportunities and strategy. They also addressed competition from RTP networks including FedNow and regulatory concerns, specifically Rig 2 (which mandates the two unaffiliated networks).

More importantly, he reiterated Visa's commitment to above double digit revenue growth for the foreseeable future.

We'll discuss it in depth in the next article, but take a look in the meantime - seekingalpha.com/...
Yuval Rotem profile picture
@Yuval Rotem Mastercard had a similar discussion -
The gap is market sentiment.
Yuval Rotem profile picture
@Rachelle Thong Thanks for the comment! What do you think drives that sentiment?
Demand Strategy profile picture
Thanks for the article. I am a long time long of Visa and tend to agree with your thesis. That said, two questions……what do you name of Mastercard powering Apple offerings - is this a potential disruptive or Visa and help explain the premium? How much if Visa trading at low end of 5 year PE simply due to higher interest rates/cost of capital? Still a high PE in absolute terms. Appreciate your thoughts.
Yuval Rotem profile picture
@Demand Strategy Thank you very much for the interesting questions. Let me begin with the easier one regarding P/E.

First, both Mastercard and Visa are trading around 13%-15% below their historical averages, which to me says this is not a specific change to Visa but an industry change. Second, usually when Visa and Mastercard trade down together it's a result of an overall market factor (like interest rates going up) but it could also be regulatory pressures, or sentiment about new competition. As I discussed in my articles, I find the current regulatory pressures and fear of competition immaterial, and that's why I believe both companies are a great buy right now.

Now shifting over to Apple. Actually, the Apple Card isn't a new thing, as it launched at 2019. So far, it seems it didn't affect Visa materially. Now, whether or not the new services that Apple is launching could cause a shift in this market, I can't really tell. As an Apple shareholder, I am familiar with its ability to transform a market completely. However, I am very certain that Visa had the opportunity to take that business as well, and probably gave it up due to pricing. Visa has a history of going against giants like Amazon and not being scared. So, Iooking at it this way, I don't think there's a major risk here. Visa decided it wasn't attractive enough to establish this partnership at the required price.

I'm sure this subject will be discussed in upcoming conferences, and will make sure to follow and update.
Longbow Archer profile picture
@Demand Strategy Visa is baked into the Apple Cash card which is direct competitor to Cash App/Venmo.
Thanks for the article!
Yuval Rotem profile picture
@dwallace1976 Thanks for the comment!
V has more global exposure than MA. Consumer spending remains strong in the US due to the lowest level of unemployment since 1969...
MA is gonna cross 400 before end of the yr
long V, MA, PYPL & ADYEY...
Yuval Rotem profile picture
@Sleepless@FED Thanks for the comment! And I agree. I find Visa's wider geographic presence reflective of it being a little more mature than Mastercard. I like all the holdings you listed, and plan to dig deeper into Adyen in the near future.
@Sleepless@FED I had never heard of ADYEY. I'll have to take a look at them.
TechSales profile picture
@Sleepless@FED PYPL is garbage. I'd rather own WM. Lol. Long V & MA
This was a very well done and well presented article. I hold Visa and have over and over seen people choosing MA and could never quite figure out why. Reading this, I find it even harder to understand why. Visa certainly seems the better choice and I'll look forward to watching that position grow as I DCA and DRIP. Thanks for your work
Yuval Rotem profile picture
@Musicloveranthony Thank you very much for the comment! Much appreciated. I completely agree. Actually, I document each time I buy Visa, in order to check whether buying it over Mastercard was the right choice. Up until now, it always was, and I don't expect this to change.
@Musicloveranthony I just have 15% of my portfolio in Visa/M. of that 15% is like 65% Visa, rest MA. Purely because they have a duopoly in this market.
ChuckXX profile picture
Yuval; Let me add a little color for you. I have owned the "Big V" since its IPO back in 2008. I listen to all conference calls, take notes, and read all their press releases as well as staying in touch with their I R MGR. V has a Gross Profit Margin of 97.58%. A Net Income Margin of 50.28%. Return on Common Equity of 43.63%. Return on Total Assets of 17.77%. And Return on Total Capital of 22.12%. VISA has a market share of 52.8%. Visa operates in 200 countries & in 2022 processed over 193 Billion Transactions. Visa has over 15,000 Banking Partners. Visa has 80 Million Merchant Locations. I will just leave you with these WORDS OF WISDOM regarding the future of both Visa & Mastercard when was the last time you heard of someone pulling out a big wad of cash and paying for their items. Unless you're the Cartel or Mafia it just doesn't happen. Visa is my #1 holding by a wide margin. I also own a position in Mastercard as well. THANK YOU for a very nice well written article Yuval.
Yuval Rotem profile picture
@ChuckXX Thank you so much for the comment! I truly appreciate your following. And, I couldn't have summarized it better. One of my largest holdings as well and I'm still a strong buyer
at these levels.
@ChuckXX Hey there Chuck - V is a large position for me too!
TechSales profile picture
@ChuckXX "V has a Gross Profit Margin of 97.58%. A Net Income Margin of 50.28%. Return on Common Equity of 43.63%. Return on Total Assets of 17.77%. And Return on Total Capital of 22.12%." WOW!!! Thanks for sharing. Long V for 7 years and adding!
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