I touted Visa at its IPO because it had such huge interest and momentum, and because it seemed a no brainer at the time. I wasn't alone, as millions made a quick 30% buying in around $60 a share the days after the IPO pricing, and the lucky few who got in at IPO could have easily doubled their money. However, the fun is over. If this stock was the baby that could do no wrong, its now the annoying toddler who can't walk and can barely string together sentences consisting of a few pronouns. Visa has been shunned by investors as profits have been taken and interest has waned. The high of 89.84 hit in early May hasn't been seen since, as the stock is currently trading at 74.79 a decline of 16.75%. The stock has traded sideways/slightly downwards since the incredible run up. Right now the stock faces close resistance around 75 and close support around 70. Personally I hate this because while I have positions in at $60, I'm also in at an average around $76. I would be swing trading the crap out of this stock right now if I had the extra bank, but right now all my extra is tied in with Visa. Anyway, the point of this article isn't to bitch about my frustrations, it's to try to provide some optimism to others long on V.
Why am I optimistic? And it's not just that I have money tied into Visa's stock. It's that and some other things.
1. Visa does not issue lines of credit, so it is not affected by credit market deteriorating as banks are. I think that one of the huge issues weighing on Visa's share price is the continued trouble within the financial sector as a whole. It is obvious that Visa is technically a financial stock, however it doesn't make its money the way a bank or other credit lender does. Visa issues the credit card, (and the network needed for the transaction) and then takes a piece of each purchase made with the card. Visa holds no responsibility if those card holders pay their bill; Visa makes money regardless.
2. The impact of the decrease in consumer spending will be dampened for Visa. While it's true less spending means less fees collected by Visa, the fact that the economy is doing poorly and inflation, especially in gas, is rising means people have less available disposable income. While this is leading to the decrease in consumer spending, it also means people have less available physical cash to spend. Paychecks are less, bank accounts are dwindling, and so people must borrow now in order to buy the essentials. Spending with credit cards, as a proportion of all sales, will rise. While macro spending will undoubtedly be a hindrance for Visa, the fact that more spending via credit cards will increase will cancel out much of the pain.
3. Visa is performing. Recently Visa beat analyst earning expectations of .48 by 11 cents. That's over 22% surprise. Shares surged, even breaking the $80 barrier in After Market Trading on July 30th. However, MasterCard's lackluster earnings, due to a one time litigation bill, brought shares back into the rut.
I expect Visa to continue to beat earnings, and at some point investors will become rational again and see that Visa is a winner among a myriad of financial losers. Visa is a solid company that's business model is one of the few that will remain virtually unscathed by the current credit market and macro economic conditions. If your long on Visa, stay strong. This stock is a winner and will eventually get the treatment by investors it deserves.
Why am I optimistic? And it's not just that I have money tied into Visa's stock. It's that and some other things.
1. Visa does not issue lines of credit, so it is not affected by credit market deteriorating as banks are. I think that one of the huge issues weighing on Visa's share price is the continued trouble within the financial sector as a whole. It is obvious that Visa is technically a financial stock, however it doesn't make its money the way a bank or other credit lender does. Visa issues the credit card, (and the network needed for the transaction) and then takes a piece of each purchase made with the card. Visa holds no responsibility if those card holders pay their bill; Visa makes money regardless.
2. The impact of the decrease in consumer spending will be dampened for Visa. While it's true less spending means less fees collected by Visa, the fact that the economy is doing poorly and inflation, especially in gas, is rising means people have less available disposable income. While this is leading to the decrease in consumer spending, it also means people have less available physical cash to spend. Paychecks are less, bank accounts are dwindling, and so people must borrow now in order to buy the essentials. Spending with credit cards, as a proportion of all sales, will rise. While macro spending will undoubtedly be a hindrance for Visa, the fact that more spending via credit cards will increase will cancel out much of the pain.
3. Visa is performing. Recently Visa beat analyst earning expectations of .48 by 11 cents. That's over 22% surprise. Shares surged, even breaking the $80 barrier in After Market Trading on July 30th. However, MasterCard's lackluster earnings, due to a one time litigation bill, brought shares back into the rut.
I expect Visa to continue to beat earnings, and at some point investors will become rational again and see that Visa is a winner among a myriad of financial losers. Visa is a solid company that's business model is one of the few that will remain virtually unscathed by the current credit market and macro economic conditions. If your long on Visa, stay strong. This stock is a winner and will eventually get the treatment by investors it deserves.
