Now that both credit card behemoths have issued earnings results (Visa for the first time as a public company) I thought it would be interesting to compare the results from each side by side. As you’ll see, both companies beat analyst estimates and reported great quarters which were fueled by international growth and big increases in global debit card use (Visa reported that International debit card use soared 43.5% last quarter!)
From a technical perspective Mastercard (MA) appears to be well on its way to the next level of resistance around 300. Visa (V), after breaking out from a bullish triangle a few weeks ago is a bit extended over the short term but based on today’s big reversal off the lows, may have a bit more room to run as well. Frankly, I’m a little bit surprised at how much Visa has moved following the IPO, considering the amount of hype already built into the stock. I am looking to take profits in Visa soon and will look take profits in Mastercard around 300.
|
Q1 2008 Numbers |
Visa (V) |
Mastercard (MA) |
| Size (market cap) | 77 billion | 35 billion |
| % Market Share | 60% | 32% |
| Total Revenues | 1.45 B (22% over year ago) | 1.18 B (29% over year ago) |
| Net Profit (excluding one time gains) | .52/share (49% over year ago) | 2.59/share (65% over year ago) |
| Analyst Est. EPS | .45/share | 2.00/share |
| US Growth (in gross dollar volume) | 10% | 9% |
| Intl Growth | 27% | 30% |
| Payment Volume | 19% | 16% |
| Cards in Circulation (% Increase) | 16% | 12% |
| Transactions Processed (% inc.) | 16% | 15% |
| CEO Quotes | "Despite a challenging economic environment, Visa recorded strong growth in payments volume and transactions globally and across our diverse suite of products — a trend which is continuing into the fiscal third quarter" | MasterCard continues to see U.S. growth "despite continued economic uncertainty," and international regions are "driving significant growth." |
| Analyst Comments | – "unique brand value and processing scale that differentiate the company from its payment peers." – the secular story and the longer-term growth and earnings potential remain extremely compelling |
"We are encouraged by these results given investors’ concerns regarding a major U.S. economic slowdown and, by extension, slower growth elsewhere," wrote KeyBanc analyst Anurag Rana in a note. |
| Technicals | After breaking out of a bullish triangle formation a few weeks ago, the stock is now extended and probably has limited upside over the next several months | Big, bullish gap up today could propel stock to major resistance around 300. |
| Notes | – International growth and increased debit-card use at home were the two main drivers for the San Francisco-based company’s results – Consumers will use credit and debit cards for 55 percent of all U.S. transactions by 2011, rising from 40 percent in 2005, according to the Nilson Report |
– Currency fluctuations contributed to 5% of revenue growth – A price increase in cross border acquiring fees contributed 6% to revenue growth |
Disclaimer: I own positions in both Visa (V) and Mastercard (MA)
Tate,
Could you please share with us your reasons for wanting to take profits in Visa. Thank you.
Frank, for no other reason than it’s way overbought, I’m sitting on a quick 25% and we’re still in a bear market until proven otherwise. However, that being said, I’m a momentum trader and following that tremendous institutional buying going on after the brief dip in the morning there is room to run. I was considering taking profits today, but the high volume reversal (pointing up) on the daily chart today acts as a bit of a springboard for further gains. I’m holding for at least another day or two.
Tate, what are your views regarding Visa and Mastercard right now? Do you still own shares in both Visa and MasterCard? Which do you preferand why?