Visa Inc. (NYSE: V) is
a worldwide retail electronic payments network. The firm owns and operates VisaNet, a global processing platform that provides authorization, clearing, and settlement services to some two billion card holders. Visa also licenses its name to member institutions, which issue and market their own Visa products and participate in the VisaNet system. The company went public in March of this year, pricing 406 million shares at $44 per share.
The stock popped last week, on positive brokerage remarks. SunTrust reiterated its "buy" rating on the issue and raised its target from $87 to $100, citing solid organic revenue and EPS growth prospects. That sparked a run to the upside in V shares, which was subsequently magnified by word of a bullish outlook from rival Mastercard (NYSE: MA). The move was accompanied by heavy interest in Visa call options, particularly the June $85 instrument.
Visa shares
have now begun consolidating the gain in a bullish "flag" pattern. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the issue with five "strong buys", eight "buys" and nine "holds". Analysts see a 25% growth rate, through the next year. The Visa Price to Book ratio (3.13), Sales Growth rate (22.00%) and Revenue per Employee ($889k) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 21% of the outstanding shares. Since going public, the stock has traded between $55.00 and $89.84. A stop-loss of $74.50 looks good here. Note that the firm is next expected to report quarterly results in late July.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in either of the stocks mentioned above.
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Reader Comments (Page 1 of 1)
6-03-2008 @ 2:47PM
Frank Lucido said...
Just remember that picking stocks is no different than gambling. You do the best you can to pick a winner. Due diligence involves reading the company prospectus, reading analyst's opinions, studying quarterly results, etc. The only thing that makes a stock increase in value is the belief that the company will be making more money in the future. Valuations can seem too high but then the next quarterly report comes out and says that the company exceeded analyst's expectations by twenty percent and bingo! The stock rises 20% (or more). HOWEVER. You pretty much are at the mercy of the people that run the market. If bad news or rumors come out, shazam, your stock can drop like a rock. Ever wonder why the stocks creep up slowly in value but when it comes to DROPPING in value, the descent is lightning fast? Ever wonder why your guy at Morgan Stanley or Schwab or Lehman Bros tells you not to sell? Ever consider that possibly he wants you to HOLD so he can SHORT your shares?
I firmly believe that the market is manipulated and IMO the big guys get advance notice before the rest of the suckers hear anything. I've noticed increases in a stock from out of no where for 3 or 4 days with no apparent reason behind it and then, BAM an announcement comes out (that you weren't privy to) and the stock barely advances because the insiders already made all the profit. That old cliche of "Buy on the Rumor, Sell on the News" really means "We already took the profit and we are waiting for you to get the good news because when the news comes out WE ALREADY SOLD!" I think it's a stacked deck.
Part of Visa taking off like it did is all the HYPE. Personally, I dont care if people want to hype a stock as long as I can make money on it. I bought a LOT of Visa and I hope all the back-slapping and pep rallying continues. However, I dont kid myself that the slime can hit the fan when the market movers decide that the stock is played out. Just be sure to COVER YOUR REAR. Dont be fooled by the people who keep shouting LONG on VISA, or LONG on MA, or LONG on XYZ. Those people arent going to send you a refund if the stock falls off the board.
That said, I think Visa is as good a stock as any. It's a great company with a huge market share and IMO should grow like crazy in the developing world. Sometimes, the biggest risk is NOT TAKING a RISK. I'll hold it a year to avoid the capital gains but NOT if it doesnt climb a couple of bucks a month! And if the quarterly report comes out soft I'M GONE!!! That said GO VISA (lol)