20 - 25 earnings is pricing it allready optimisticly. 35 is just way beyond reasonable. What kind of growth are you expecting ?
i think in viewing the credit card companies as a buy in ' a recession ' due to the fact that they do quite well in these periods traditionally and historically could be a major mistake. in the past this worked as people would fall back on credit cards and small loans to help them through difficult periods. the credit card companies and small loan co's would obviously do quite well with a surge in fees and interest etc etc. however that was on the old model and this is now the new economy. as amex just found out recently default rates this time round are a lot higher. i think the big difference is previously households never had existing credit card debts and certainly equity extraction was not common place where as now everybody has 4/5/6 credit cards with an exsiting loan, a car on the finance and also taken out $50k equity withdrawal to finance the last few years. sadly the credit card companies are starting to realise this where as the market has wised up to this already. hence their lower share prices.
Ok, these are good points about (CREDIT) card irresponsibility, and the consequences of that. But VISA makes thier money from their (DEBIT) card transactions. And with new economy people still do not carry large sums of cash, or travelers cheques. Debit card is part of everyones way of life in USA . Convenient and safe way to not have to carry cash. And the money withdrawn is money earned, not money borrowed to be payed back at another time. VISA wants to tap into new markets that are growing, like India,Argentina,Poland,Egypt.......many more. Even China if allowed a joint venture, and everyone knows China has a huge population. So unless a whole new system is developed to take money from the bank other than debit card at ATM machine, or going to your own bank, then VISA looks strong to me for long term.
I think a lot of the concern is over pending legislation about credit card merchant fees. In our very weak economy, merchants are complaining at length about the effects of these fees. This is the bread and butter of V and MA, so anything that would limit these fees would have a negative effect on their growth. However, as a merchant, you have have many processors to choose from at varying fee levels, so I'm not sure how in a free market economy legislation could be enacted that would in some way affect this.
Yes, merchants have many complainst with the fee. Their only option right now is to not accept credit cards, and no big merchant wants to do that. This is where Discover has made their play to gain in the market share. Discover has dropped the restriction on merchants to pass that fee to the customer. Maybe Discover wants to force VISA and MA to follow their lead? So maybe Discover is more appealing to the merchant now, but it will not appeal to the card holders when they are picking up the fee the merchant once did. So yes, like you say, this is a risk for VISA and MA.
the reason MA was down was because they only beat by a few cents while the stock was up over 400% from the ipo. you cant only beat by a few cents. The charge you speak of has nothing to do with it. when you look at earnings you take out 1 time charges. just as if you sell some asset at a gain in a quarter and siginifally increases your EPS you dont count that either. people who follow earnings look for those clean numbers
I understand VISA to be its own company as VISA Inc. They license their product to banks. They own VisaNet also. I am not certain though how the ownership works. Here is link to company holdings. http://ca.finance.yahoo.com/q/mh?s=V