IPO Takes Visa

3/19 - "Recently, I've been getting too many emails and comments on my blog asking what I think of the Visa (NYSE: V) IPO. Listen, every single long-term investor should be interested in it. Until today, it's been one of the few remaining marquee companies around unavailable to our stock-obsessed society and aside from litigation risk, the company's got everything going for it."

"...in rare situations like these, it's best to think in terms of the general picture. Not because it's the right way to invest, but because it's the way most people do. And those most people are the ones who can really influence the stock price here."

3/18 - "Cramer would buy a hundred shares of the Visa IPO up to $43. If it is higher, Cramer would buy MA instead which is a "gift."

3/19 - "There are several good reasons for investors to take to the stock -- which I outlined on Tuesday -- and now I'd like to flip things around and look at some potential concerns."

"$10.2 billion of the company's IPO proceeds will go to redeem shares held by member banks such as JPMorgan , Bank of America, Citigroup , and Wells Fargo...Those payments have been a powerful incentive for banks to keep Visa as a client. Once they're paid out, the incentive vanishes...Over the past five years, Visa has paid out $4.3 billion in litigation provisions, or 28 cents on every dollar of revenue it's brought in."

"...unlike the previous recession earlier this decade, which hurt business spending but was supported by consumer spending, a recession this time around could hurt the consumers that Visa depends upon...The volatility could swing to the negative side at any moment....According to projections in Visa's own prospectus, its core market will see slower growth in the next several years."

3/19 - "We reiterate our Buy and $250 price target, as we believe MA should be a direct beneficiary of the Visa IPO that priced last night. The historic offering vastly improves the visibility, liquidity, and overall importance of the payments space...We spent some time dissecting the various nuances of the two businesses, and based on this work we conclude that they are too similar to trade at vastly different valuations going forward."

"Visa has many advantages over MA: #1 franchise, dominant market share, leading PIN-debit presence, faster top line growth with higher operating margins, and less headline legal risks due to how the offering was structured. MasterCard’s edges include higher margin upside due to more excess capacity and less promotional commitments, a simpler organizational structure that should maximize SEPA participation, a more established management team, and less exposure to a drastic consumer spending slowdown in the US, in our view."

"...we believe the secular growth dynamics of the payments landscape are compelling enough for both to continue wielding pricing power and to drive operating leverage through realizing further scale benefits and cost-cutting. Considering this, we continue to recommend MA. Our 12mos price objective is 25x our 2009 EPS, which we believe the market could begin to afford MA as next year’s earnings picture comes into focus."