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Visa IPO: Profit from a Historic Initial Public Offering

Posted March 1, 2008

by Ian Cooper, Small-Cap Pit Trader

Baltimore — (TFN): Two years after the MasterCard IPO, shares catapulted from $43 to more than $200. But with greater market share and reach than MasterCard, Visa and its coming record-breaking IPO may be too good to pass up.

In a market virtually frozen by credit and bank woes, and tumultuous economic uncertainty, Visa could put an end to pent-up investor demand for any company not suffering from credit issues.

Unlike Capital One and Discover, Visa is a card processor, not a lender. That means it takes money from the banks that issue cards and doesn't extend credit. Smart move: As of November 2007, credit card debt had soared at an 11.3 percent annual rate in November following an 8.5 percent rate of increase in October and is still on the rise.

But Visa doesn't have to worry about cardholder debt. That concern lies with the banks that issue the cards.

That means that Visa won't have much exposure to the spiraling credit crisis, unlike others: Why do you think Discover Financial Services (DFS:NYSE) stock plunged from a $35 IPO price to $15? It's a card lender, and concerns itself directly with cardholder debt.

Consider this. In the U.S. alone, Visa is the biggest credit card company by market share, and has great presence in other countries, where people are just starting to use credit cards instead of cash. Even more impressive, "the 44 billion transactions totaling about $3.2 trillion that Visa processed in 2006 nearly doubled the number of transactions by MasterCard, its biggest competitor."

Visa can even boast about having the world's largest retail electronic payments network. And with homeowners struggling to stay above water, Visa, like MasterCard, shouldn't have a problem. They're benefiting as revolving credit has risen more than 11%, as of November 2007, as compared to the 6.1% of 2006 and the 3.1% of 2005.

And, they're benefiting as credit card debt ballooned to $790 billion. Watch for the Visa IPO. It's supposed to trade under "V." It may pay a dividend, too.

Follow the Visa IPO by becoming a member of Ian's trading service. 

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Posted by Ian Cooper · Filed Under US Stocks and Markets 

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