VISA is Always Safe Even in Times of Financial Turbulence
Muhammad is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Visa (NYSE: V) is collaborating with the U.S. Department of Homeland Security (DH) and National Cyber Security in several events to promote cyber sensibility and security. These programs are directed to build awareness and educate consumers and businesses to maintain proper cyber security and reduce possible threats from hackers. Since the usage of digital information is so widespread, anyone is at risk of possible Internet threats. This initiation of cyber awareness has led investors to believe VISA is caring for its consumers and creating a positive influence on its portfolio. Happy consumers equal happy investors with bigger profits. VISA is charging towards the bullish side of today’s depressing markets.
The U.S. Justice Department is seeking information from Discover Financial Service (NYSE: DFS) regarding violations of Section 1 and of the Sherman Act. VISA also disclosed that the DOJ was involved in probing its business strategies for potential violation of anti-competition laws. As VISA is related to debit card issuance, the CID may be involved as well. The latest pricing strategy intends to protect dominant investors and consumers within its market in response to the Durbin amendment. Since April, banks have been required to include multiple processing networks on their cards.
MasterCard (NYSE: MA), the second largest payments network, has disclosed in its annual investor meeting that it anticipates its second half revenue growth will be lower than the second quarter. MA has increased to 9.2% or 13% on local currency basis to $1.82 billion. But MasterCard has outperformed its existing forecasted growth. Net revenue increased by 16%, whereas existing forecasts expected only 12% to 16%. Its operating margins rose to 56% compared to its original target of about 50%. CEO, Ajay Banga mentioned that times are tough but the company is growing at attractive levels. MasterCard forecasted 11% to 14% of compound annual rate for 2013 to 2015 compared to a previous forecast of 12% to 14% for the same period. It also reinstated operating margins to remain at 50% as previously forecast.
On the other hand, VISA has bought a stake at Australia and New Zealand Banking Group Ltd (ASX:ANZ). ANZ made $244 billion in profit selling 3.5 million VISA shares, declaring this earning will solely be for the purpose of safekeeping in times of financial crisis, in this stringent and turbulent economy. CEO, Shayne Elliot, said that selling the shares was viable given the non-strategic nature of the holding in their less attractive capital treatment under BASE 3.
American Express (NYSE: AXP) is also lagging VISA by almost 8% in terms of performance. But an outbreak of price levels is anticipated as the market for AXP has moved laterally for quite a while now and is tending to be continuous with high and lows ranging from $58.40 to $55.
Viking Global and Cone Pine, the two best performers of the Tiger Cubs have large shares in VISA and expect the prices to rise. Even with a 61% downside analysts believe it has to rise even further.
Overview of VISA
Visa’s P/E is quite stable between both the DOW and the S&P 500. Visa has always been a great performer in the market and it has maintained its goodwill among customers and consumers on a regular basis. The brand is respected and their recent initiatives on safety have further increased their goodwill. This goodwill is bound to have a bullish effect on the share price. Since the other rival financial companies are facing a downfall VISA seems stable in terms of operations and business initiatives. For now it is safe to hold your shares until it drops to $138.80. If it goes lower than this, it’s best to hedge your risks. But it is likely that it will come back to its previous high until an outbreak at $139.50. New investors are not encouraged to delve into the turbulent financial market. Investors should wait until the overall market condition for financial stock is a bit more favorable.
muhammadbazil has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, MasterCard, and Priceline.com and has the following options: short OCT 2012 $55.00 puts on American Express Company, short OCT 2012 $60.00 calls on American Express Company, and long OCT 2012 $65.00 calls on American Express Company. Motley Fool newsletter services recommend American Express Company, Apple, Priceline.com, and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.