With the economic downturn, rising unemployment, decline in house prices, and limited ability for consumers to continue using their homes as an ATM; credit card debt is poised to be the next disaster in the financial sector with bearish outlooks for credit lenders Capital One (COF), Discover (DFS), and American Express (AXP). Credit card processors such as Visa (V) and MasterCard (MA) have also declined with the overall market, but are leveraged to the volume of transactions with debit and credit cards rather than
Visa, Inc., through its subsidiaries, operates retail electronic payments network worldwide. It facilitates commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses, and government entities in approximately 170 countries and territories. The company owns and operates VisaNet, a global processing platform that provides transaction processing services, primarily authorization, clearing, and settlement. It offers a range of branded payments product platforms, which customers use to develop and offer credit, charge, deferred debit, de...
The current credit crisis and liquidity crunch has made even the professional investors balk on calling a bottom. One stomach churning event after another has proven the most optimistic analysts to not only be wrong, but little more than contrarian indicators.
The recent market correction has left many investors shell-shocked and bottom picking value seekers in the red. From financials to tech to energy, the fate of stocks like Citi (C), Exxon (XOM), Apple...
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Names like American Express (AXP) and Discover Financial (DFS) will be hurt with these delinquencies as they will be forced to write-down their portfolios. The pure-play card servicers aren’t completely recessionary proof, but history has shown that they perform well during these times, and extremely well during recovery periods. Visa Inc. (V) and MasterCard Inc. (MA) will continue to outperform their peers and are safe plays for any portfolio.
The Industry
Card Servicers are generally mis-understood by many investors. They operate as pure network use plays. They hold no credit exposure o
I’ve been saying the same thing for months.Ignore American Express (AXP) because of its exposure to consumer debt.But no one listened.AXP will be fine, they said.You’re blowing the consumer issue out of proportion. “Ian Cooper has no brain,” said one reader.
Per the S&P: We anticipate an increase in rebates and incentives to V's merchants to encourage issuance and acceptance of V's cards, due to competitive pressures.We also look for advertising expense to increase in the second half of FY 08, reflecting pending on the Summer Olympics. As a result, we look for operating margins to decline in the second half of FY 08 to roughly 42%, from the roughly 45% level achieved in the first half. Risks to our recommendation and target price include regulations that may limit interchange fees, negative outcome of pending litigation, customers branding...
Consumer confidence keeps heading lower as gasoline keeps heading higher and property values plummet. This double whammy has the potential to put the consumer into a long tail-spin. In such an environment, as disposable income declines, credit card use goes up.
Visa (V) would benefit from such credit card use, as it already has. The stock has recently pulled off its high of $90 and sits a good 12% lower. Meanwhile, credit card issuers will not fare so well. Companies like Capital One, which issue unsecured debt, will see increasing amount of delinquencies and loan defaults. Capital One (COF)
Stocks discussed in the lightning round session of Jim Cramers Mad Money TV program, Monday June 16. <!---->
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Bullish calls:
Oceaneering International (OII): I would buy that company on any dip. You have a winner there. FMC Corp (FMC): may I throw in FMC Corp and Core Labs as two other great ones." Core Labs (CLB) HJ Heinz (HNZ): The only food company I'm behind here is HJ Heinz because they're the only ones who made the quarter." Sony (SNE): "I think the yen is coming around and Japan is coming around. I think I'm going to get behind Sony here." Visa (V): "I like Visa very muc
I've been keeping an eye on it and it's down from $85 to almost $80. Seems like a good time to get in while this recent IPO is on its way up the ladder. This company is a cornerstone of the American economy. Top analysts along with the Chinese sovereign wealth fund agree that this could easily be around $150 or 60 around this time next year. I agree. This is a long term play. 7% of portfolio. Cheers!
5/21 - "...current legislation (could) potentially result in the renegotiation of fees that merchants pay issuing banks, known as the interchange fee. While Id be far out of line to assess the odds that the bill passes, its a worthwhile example to illustrate why American Express is the much better company and as well see later when looking at valuation investment."
"Visa and MasterCard...are very much a duopoly in the credit card market, with roughly 80% of the cards in force being one of those two brands. While there are lawsuits by merchants alleging antitrust violations, none hav...
6/3 - "The stock popped last week, on positive brokerage remarks. SunTrust reiterated its "buy" rating on the issue and raised its target from $87 to $100, citing solid organic revenue and EPS growth prospects. That sparked a run to the upside in V shares, which was subsequently magnified by word of a bullish outlook from rival Mastercard (NYSE: MA). The move was accompanied by heavy interest in Visa call options, particularly the June $85 instrument.
Visa shares have now begun consolidating the gain in a bullish "flag" pattern. Prices frequently exit flags moving in the same direction the...
5/27 - "SunTrust is out with a pretty major call on Visa (NYSE:V) reiterating their Buy rating and raising fiscal 2008, 2009 and 2010 EPS estimates and price target. Firm's target is $100, and new fiscal 2008, 2009 and 2010 EPS estimates are $2.11, $2.96 and $3.82, respectively. These compare with prior 2008, 2009 and 2010 EPS estimates of $2.04, $2.69 and $3.55. These sharply higher estimates reflect firm's confidence in Visa's volume growth, pricing power and operating leverage."
"It is firm's view that most analysts have been unwilling to boost their growth forecasts for Visa as the com...
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