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Sunday, May 3, 2009

Life Takes Visa... Just How Powerful Are They?

Recently Visa reported an absolute blowout quarter. In just their first year public amidst an economic disaster, they have been a powerhouse. Visa was expected to make 64 cents a share and they reported better by 9 cents or 73 cents a share. Quarter over quarter growth: for revenue was 13.35%, EPS was 40.38%, and net income was over 70%. Looking at the chart it looks like if we can get Visa above 68 a share it could easily get to the 71 range. Visa closed the gap down set in late October which if it can hold above the 63 level is a very bullish sign. If Visa breaks below the gap down set in late October, this is a bearish sign, and we could easily test resistance at the 60, and then the 58-56 level. The chart is indicating Visa wants to trade higher in the weeks to come.

With the growth of credit cards not only in the United States but globally, I think Visa's EPS growth at 18% for the FY 2010 year is extremely low. Visa should be able to grow at an even greater rate coming out of this recession. Given the growth of credit cards in the past decade especially due to e-commerce, I believe in the next decade to come, credit/debit cards will be the number 1 form of payment. The three biggest players are Visa, MasterCard, and American Express with Visa being to credit cards what Xerox was for copiers. So just how powerful is Visa? Using Google Trends we can see what the search results for the keywords: Visa, American Express, and MasterCard, against the term Credit Card are. The results may be startling (click image to enlarge).
As you can see for every 100 searches for the word credit card, Visa was searched 186 times, followed by American Express 74 times, and MasterCard with 28 times. The word "Visa" was actually Googled more times than "credit card". The words "credit cards" and "master card" were also checked but both were even weaker than the terms used in this analysis. Also from this analysis we can see that "Visa" was searched heavily about a month before its IPO which was March of 2008. We can also see during the first and second quarters of 2008 Visa was searched at an increasing rate. Why could this be? Maybe it was because consumers were getting squeezed by higher gas prices and were in need of more credit, perhaps it was Visa's extremely creative ad campaigns which emphasized cashback on gasoline as well as other purchases, as the fears of recession started to hit consumers, or perhaps it is just the Visa trend. Each year shows a similar trend for the term Visa. This data indicates Visa is Googled most in June or July of each year, and decreases steadily until late in the year, it has a drastic increase (this late-year increase is also similar for American Express). Could this be consumers seeking additional credit, because they spent too much during the holidays? This may be the case, but this data shows instead of searching for "credit card" in general they search Visa. This data shows Visa to be quite popular and preferred among consumers worldwide (all regions).

The Google trends image below shows the results for just the terms Googled in the U.S. The word credit card is Googled more than Visa, but just 7 times out of 100, but American Express and MasterCard are still lagging.
Google trends also shows Visa to be the preferred card in the fastest growing developing countries. Searching the same keywords (excluding credit card) for the BRIC countries are as follows. Data from Brazil shows the terms MasterCard and American Express to be Googled 36 and 22 times respectively for every 100 times Visa is Googled. Russia shows Visa to be Googled 50 times more than MasterCard with the term American Express not even hitting the radar. India shows the terms MasterCard and American Express to be Googled 1 and 10 times respectively for for every 100 times Visa is Googled. And China the biggest and fastest growing country shows the terms MasterCard and American Express to be Googled 2 and 7 times respectively for every 100 times Visa is Googled.

These results certainly show the whole world takes and prefers Visa. In conclusion I am extremely bullish on Visa both short and long term.

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