I would like to see VISA to be on the list please. Looking promising with the crashes lately and how future potential for visa. Sincere people is moving to online shopping. Visa will be used a lot
Now that we’ve launched US stocks, this is available in the app
Feel free to create a new #investing-and-markets topic & share your thoughts about Visa’s future with the community
Sven Carlin has made a good video analysing value stocks (using V as an example!)
Worth a watch:
Hi Freetraders, I made a stock analysis for Visa and Mastercard which can be viewed here:
Sven is a great youtube analyst, I enjoy his approach.
Thanks a lot for this! This is very interesting! Are their any other blogs you would recommend me?
CEO of Mastercard handed over his role recently. Banga is a great leader. As someone working in payment sector, I admire his innovations and leadership hugely throughout these years.
Came across this article below recently since I started using their app after seeing someone mention it here. Some useful and easy to understand analysis on some key financial metrics of both Visa and Mastercard. I am shocked to learn that Mastercard’s return on equity is as high as more than 100%. I like both businesses a lot, but to decide which one to own, I need more time to know about both as stocks rather than just companies.
There was a episode of The Investors Podcast with Stig Brodersen and Preston Pysh (ep281). They had a guest on who did a detailed review of MasterCard and gave some views on preference over Visa. Well worth a listen
Also did video, if blog is not your thing
I wonder how much COVID-19 is impacting Visa and Mastercard. They must be struggling with an overall decline in spending. The medium-term outlook is not great due to the decline in cross-border payments, which is a major driver of their profits.
Equally, they have pricing power when it comes to processing fees, and cash might be avoided in the future due to being a surface for the virus. So there are plenty of reasons to feel positive about these companies’ future.
What does everyone think?
This is my high level thesis:
Hurt short term due to transactions being reduced. Especially in physical consumer spending and also in travel related spending. This will hit growth this year and you need growth to justify the high valuations still.
Medium To Long Term: Electronic Payment will continue to replace physical cash. Virus may even accelerate this as cash is seen as a point of contagion. They will take good share of developing world as they move to electronic payments which will still fuel mid to upper single digit growth for another ten years. No risk of bad debt as it is the banks who hold the risk of default,
Inflation proof if all this QE causes inflation in next few years as business model is percentage of transaction.
They make massive margins, have a huge network effect and are now getting fin tech to build their business as layer on top of Visa (or MasterCard) network. High degree of trust.
They’ve partnered with FB, Apple, Google etc so have hedged the big tech displacing them.
I like them both, missed the big wave from 2008, but should be a solid stock in portfolio to buy and hold.
PS. I think they’ll both go lower still in next 3 months
Thank you for your thesis @Theinvestmentjourney Dale. I appreciate your time answering me.
I’ve been thinking why Visa seems a better investment than Mastercard to me personally. Please note that none of this is investment advice and you should do your own research before putting money into shares, and you can lose your capital.
That out of the way I first got interested in Visa after the Plaid acquisition.
For those interested, Plaid is similar to what open banking is supposed to turn out to be here in the UK, they provide “plumbing for fintechs”.
Mastercard has been the first to jump on the finch wave, and is. somewhat “smaller” of a business than Visa, based on all key indicators, but Visa’s strategy and market dominance attract me more.
I agree that electronic and particularly contactless payments will be only more prevalent in a post-virus world. The trend has been there, and I think the virus is going to put the trend “on steroids.”
Back to basics, both Visa and Mastercard earn their revenue from the following sources:
- Service fees – fees paid by card issuers and the banks of merchants for using the Visa or Mastercard network and their payment services.
- Data processing fees – fees for authorising, clearing and settlement of transactions.
- Cross-border transaction fees – for purchases where the card issuer and merchant are in different countries and for foreign exchange currency conversions.
- Other services – fees for services such as consultancy, data analytics and licence fees for using the Visa and Mastercard brand.
The revenue mix for Visa:
There even mix for Mastercard:
- Visa gets nearly 70% of revenues from service and data processing fees, and has been fairly stable for the past few years.
- A higher share of Mastercard’s revenue comes from cross-border and foreign exchange conversion fees (see the grey part of the chart) than Visa’s. Mastercard gets 65% of its revenues from outside the US vs 55% for Visa. This would drive more cross-border transactions for Mastercard, meaning COVID-19 would impact Mastercard more.
Do you Dale or anyone on the forum considers Mastercard a better investment at current prices?
(The source for the chart and the data points is the excellent IC article on the two companies.)
Just like Warren Buffet I own both (not financial advice).
I also own PayPal, instead of trying to pick a winner I’ve just hedged my bets by owning all 3…and in my opinion, in the next 5/10 years all 3 will show some very decent growth.
*like I say in my YouTube videos, take this with a massive pinch of salt
That is true @Jamie1088 you don’t have to choose just one! I do prefer investing in ETFs and a handful of carefully selected shares, to achieve above-market returns, hopefully. I like investing into just 4-5 shares and maximise my investment, that’s why I’m trying to make a decision between the two. But my strategy is not for everyone and I agree with you about taking everything with a pinch of salt.
Bit like Jaime, I own both and treat them like a single position. I aim for 10-20 shares in a portfolio with 5-10% weighting to each position. I currently have 5% to these two but if they keep coming down, then I will grow it A little bit more.
I think MasterCard is better positioned for emerging markets and therefore I like their growth potential more but they’re both great companies
Did you know PayPal has a agreement with Visa where PayPal get paid by Visa to enable the Visa network with PayPal transactions in US. It’s unbelievable how embedded they are in everything
It’s the same with Square and their cash app and cash card, it’s more or less run by Visa.
Don’t forget Alibaba and Tencent - get these two as well and you’ll have the future of payments sewn up.
Alibabas Ant financial that was Alipay is a stock I would love to own