Opinions
Bruce Tatters
Visa Inc.
V-N
COMMENT
Jan 10, 2017
Stock price when the opinion was issued
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He owns Visa and owned MA a long time ago. Both are great, but he prefers Visa. Visa trades slightly cheaper in terms of valuation, and is much larger than Mastercard (Visa is bigger than all competitors combined). MA is more internationally active. Visa has a higher percentage of debit cards, which grows faster than credit cards. Visa competes well in terms of growth rates with MA, yet trades at a lower multiple, so cheaper. He likes that the debit card business is growing faster than credit cards.
See his other comments today. Is a juggernaut. Will benefit from higher inflation, because they are paid on transaction volumes, which have not declined. There's great growth in Europe, Latin America, Africa and Canada, though it's subdued in the U.S. P
(Analysts’ price target is $387.33)Average rate of return of 20% since it went public. Does take pauses, and it looks to be taking one right now. The drop looks a bit concerning, though still in a normal trading range. If it can hold above the $330 level, it's worthy of buying on this dip. Something bad happened yesterday to cause the almost 5% drop.
But you have to be very careful. You need a trading plan, which means that if it drops below $330, you sell. Solid support at $315.
97% gross margins, and 60% operating margins. A play on global transaction volumes. Worries about stablecoins; but however people decide to pay for something, Visa will take its share. There will always be competitive threats, but its network is a backbone of payments and can't easily be replicated. Yield is 0.68%.
(Analysts’ price target is $387.33)Largest payment processor in the world. Still lots of growth potential outside NA for transitioning from cash to digital. Value-added services, such as cybersecurity, are now almost 25% of revenue base. Robust network. Don't discount them because of stablecoin, will be actively involved.
Visa and MasterCard (MA-N) have been terrific performers over the last few years. There was so much regulation in other parts of financial services, there was no earnings growth, other than a few names. These 2 were getting all of money and valuations kept getting pushed. On earnings valuation, they are in the mid-20s. They’ve actually come down, because they continue to grow and the stocks flattened out a little. When the other parts of financial services, US banks, US brokerage firms start to do better, money will come out of these high flyers. He prefers things like Bank of America (BAC-N), Goldman Sachs (GS-N), Morgan Stanley (MS-N) which are probably going to have similar, if not better earnings growth over the next couple of years.