Viking Posted February 4, 2011 Share Posted February 4, 2011 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 Link to comment Share on other sites More sharing options...
prunes Posted February 4, 2011 Share Posted February 4, 2011 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? Link to comment Share on other sites More sharing options...
ericd1 Posted February 4, 2011 Share Posted February 4, 2011 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 Link to comment Share on other sites More sharing options...
Viking Posted February 4, 2011 Author Share Posted February 4, 2011 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. Link to comment Share on other sites More sharing options...
Viking Posted February 4, 2011 Author Share Posted February 4, 2011 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 Link to comment Share on other sites More sharing options...
biaggio Posted February 4, 2011 Share Posted February 4, 2011 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.) Link to comment Share on other sites More sharing options...
tengen Posted June 30, 2011 Share Posted June 30, 2011 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 Link to comment Share on other sites More sharing options...
Liberty Posted June 30, 2011 Share Posted June 30, 2011 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?) Link to comment Share on other sites More sharing options...
rranjan Posted June 30, 2011 Share Posted June 30, 2011 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. Link to comment Share on other sites More sharing options...
given2invest Posted June 30, 2011 Share Posted June 30, 2011 When was the last time you've seen am American Express debit card? Rare. Link to comment Share on other sites More sharing options...
Liberty Posted June 30, 2011 Share Posted June 30, 2011 When was the last time you've seen am American Express debit card? Rare. My bad. I wasn't following this story very closely (I don't own any of these stocks, except maybe indirectly through BRK) and didn't notice that this was about debit card fees and not credit card fees. Link to comment Share on other sites More sharing options...
jeyfox Posted August 1, 2015 Share Posted August 1, 2015 Hi, I was a shareholder of this company and thought it would be interesting to keep following it even if the price is not great. With the 3rd quarter results, V managed to get some double digit increase in revenus. It is quite impressive yet the P/FCF is at 31! Great company just too expensive in my opinion. At the end of october, we will have some news concerning their discussions to buy back Visa Europe. There was an article in the french press which gave some numbers: - an amount which was given (and represents the higher end) was 17,8 billion euros which represents 13,7 times Visa Europe revenues or 50 times the 2014 FCF of Visa Europe… - another price (lower end) was more towards 25 times the FCF. We will see. Cheers! Jeremy No holdings in Visa. Link to comment Share on other sites More sharing options...
Liberty Posted October 29, 2015 Share Posted October 29, 2015 http://www.wsj.com/articles/visa-nears-22-billion-deal-to-buy-european-counterpart-1446136455 Visa Nears $22 Billion Deal to Buy European Counterpart Link to comment Share on other sites More sharing options...
Liberty Posted November 2, 2015 Share Posted November 2, 2015 23.3 it is: http://www.nytimes.com/2015/11/03/business/dealbook/visa-to-buy-back-former-europe-unit-for-up-to-23-3-billion.html Link to comment Share on other sites More sharing options...
Phaceliacapital Posted November 2, 2015 Share Posted November 2, 2015 I read that it's around 214 mn in profits... How do you justify this? Link to comment Share on other sites More sharing options...
vinod1 Posted November 2, 2015 Share Posted November 2, 2015 I read that it's around 214 mn in profits... How do you justify this? Not justifying the price paid, but the profits are below what they would be if Visa Europe has been completely independent entity. They are owned by the banks and so limited in their ability to hike up the fees for network usage. The price to be paid is tied to Visa's own valuation. So what Visa is paying is based on Visa's forward PE multiple applied to adjusted forward earnings of Visa Europe. Vinod Link to comment Share on other sites More sharing options...
merkhet Posted November 2, 2015 Share Posted November 2, 2015 Page 55, http://annualreport.visaeurope.com/files/pdf/visa_europe_annual_report_2014_complete.pdf My guess is Visa Europe's revenue is a little above to €1.4 billion this year. On 17% net margins, the 2015 net earnings should be around €238 million in profits. The big difference is in the fact that: Visa Europe was run by banks, so fees were probably lower than they should be Visa U.S. has 43% net margins and Visa Europe's additional revenue has high contribution margins Link to comment Share on other sites More sharing options...
Phaceliacapital Posted November 2, 2015 Share Posted November 2, 2015 Ok but 43% on 1.4 bn is still +/- 36x earnings, not a lot of margin of safety for execution.. Link to comment Share on other sites More sharing options...
merkhet Posted November 2, 2015 Share Posted November 2, 2015 Ok but 43% on 1.4 bn is still +/- 36x earnings, not a lot of margin of safety for execution.. Yes, but the contribution margin is significantly higher than 43%. (Check out the impact on operating margins and/or operating income for every 10% increase in revenues at Visa U.S.) In other words, I think that Visa Europe is duplicating a lot of expenses that are already incurred at Visa U.S. And then add some pricing increase on the top line. I'm not saying it's a home run type of investment for Visa. I'm just saying it's not as bad as paying 100x earnings. :) Link to comment Share on other sites More sharing options...
orthopa Posted November 2, 2015 Share Posted November 2, 2015 Looks like V didnt buy back any stock in Q4. They are usually quite smart about the price they pay during the Q when they buyback. Not saying the price is too high and to sell but management seems its best to hold off. Added another 5B so looks like ~7.5B left to buyback. Hopefully the price comes in some. Will allow more buyback and Id like to get a little more under ~20 times. Agree that fees can be raised, not cheap but it always seems like these deals happen near lofty valuations such as now. Euro is the weakest its been in years so that helps price some. Link to comment Share on other sites More sharing options...
Liberty Posted January 28, 2016 Share Posted January 28, 2016 http://investor.visa.com/news/news-details/2016/Visa-Inc-Reports-Fiscal-First-Quarter-2016-Results/default.aspx Link to comment Share on other sites More sharing options...
Liberty Posted June 30, 2016 Share Posted June 30, 2016 More legal troubles for V and MA... http://www.theglobeandmail.com/report-on-business/international-business/us-business/visa-mastercard-antitrust-settlement-with-merchants-is-voided/article30700276/ Here's the decision: http://www.ca2.uscourts.gov/decisions/isysquery/3b121c10-fbe8-4ced-8292-dc898f0f48a9/1/doc/12-4671_complete_opn.pdf#xml=http://www.ca2.uscourts.gov/decisions/isysquery/3b121c10-fbe8-4ced-8292-dc898f0f48a9/1/hilite/ Link to comment Share on other sites More sharing options...
orthopa Posted July 2, 2016 Share Posted July 2, 2016 Per Barrons Evercore ISI Thursday morning, The United States Court of Appeals for the Second Circuit vacated and reversed the approval of the December 2013 settlement of U.S. credit-card interchange litigation between Visa and MasterCard and a class of merchants in the Eastern District Court of New York and remanded the case to be reheard by the same Court. The U.S. Court of Appeals concluded that the class plaintiffs or the merchants were inadequately represented in violation of Rule 23 (a)(4) and the Due Process Clause. Based on our preliminary assessment, the negative financial impact on Visa (ticker: V) and MasterCard ( MA ) should be manageable, although it is too early to quantify. While the rehearing of this case could take years, Visa is indemnified against financial liability in merchant interchange litigation under the Retrospective Responsibility Plan (RRP) by its pre-initial-public-offering owner banks. MasterCard has no such indemnification by its pre-IPO banks. However, as of March 31, MasterCard’s balance sheet carried $2.875 billion of cash, net of debt. Second, the rehearing of this case will focus on Visa’s and MasterCard’s business practices. Even if the merchants win concessions, consumers ultimately will determine how credit and debit cards are used. The Court of Appeals highlighted three of Visa’s and MasterCard’s business practices: 1) the setting of the default interchange fee, paid by merchants to Visa and MasterCard-card issuing banks; 2) the “honor-all-cards” rule requiring merchants who take at least one of Visa’s and MasterCard’s cards to take all of them; and 3) no “surcharging” rules, since separately, under a 2011 consent decree with the Department of Justice, Visa and MasterCard permitted merchants to discount transactions and to steer consumers away from credit-card use. There were two classes of merchant plaintiffs in the Dec. 13, 2013 settlement. The first class, the “opt-out” class, or Rule 23 (b) (3), received monetary damages of $7.25 billion, to which Visa set aside $4.4 billion from its restricted cash escrow account and to which MasterCard set aside $790 million. The second class, the “non-opt-out” class, or Rule 23 (b)(2), received injunctive relief, such as the ability to surcharge both Visa and MasterCards at the brand and product level. The Court of Appeals took issue with injunctive relief to the “non-opt-out” class terminating on July 20, 2021 whereas the merchants released Visa and MasterCard indefinitely from certain types of future potential claims. Our biggest concern arising out of the Court of Appeals decision is that the retrying of such merchant interchange litigation could take years, creating an overhang on Visa and MasterCard stock. We are less concerned that the potential settlement will be highly material to Visa or MasterCard’s earnings growth outlook. With Visa stock down 3.4% today and MasterCard 4.4%, much of this is already discounted, we believe. On Aug. 11, the District Court will hold a conference with all parties involved to discuss next steps in the litigation. MasterCard trades at 21.2 times, and Visa, 21.8 times, our fiscal 2017 earnings-per-share estimates, respectively. -- David Togut -- Rayna Kumar -- Anthony Cyganovich I personally would welcome a prolonged overhang while materially not affecting the business. Id like to buy more of these businesses at a sub 20 PE. Link to comment Share on other sites More sharing options...
Liberty Posted July 6, 2016 Share Posted July 6, 2016 Morningstar concludes: http://news.morningstar.com/articlenet/article.aspx?id=758906&SR=Yahoo Overall, we think these items support our thesis that merchants are exercising more power than they have in the past. That said, the handful of high-margin basis points retained by Visa and MasterCard pales in comparison with the larger fees paid to merchant acquirers and card issuers. Furthermore, security technology is changing fast, and the signature versus PIN debate may soon be obsolete. Regulatory and structural changes (network initial public offerings and the Visa/Visa Europe merger) have already increased competition considerably since the initial bouts of litigation more than a decade ago. Finally, we think the growing value of the data gathered by the networks offers upside potential that offsets the risks of further regulatory and legal actions. We are maintaining our fair value estimates for Visa and MasterCard. Link to comment Share on other sites More sharing options...
Liberty Posted July 25, 2016 Share Posted July 25, 2016 Interesting piece about the V-PYPL deal: http://www.pymnts.com/news/payments-innovation/2016/how-will-visa-paypal-shape-the-future-of-payments/ Link to comment Share on other sites More sharing options...
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