Visa has been the most anticipated IPO for months, and today was finally the day that it started trading. The stock was priced at $44 per share last night, which was above expectations. During the trading day today investors bought up shares of Visa (NYSE:V). The stock finished the day higher by 28%. After today's runup Visa now has a market capitalization of around $45 billion. To put that into perspective, Visa's market cap is now higher than brokerage giant Merrill Lynch, which has a market cap of just under $41 billion.
So what is all the buzz about with Visa, and will the company and the stock be able to live up to such lofty expectations? I will examine these questions one by one.
The buzz around Visa comes largely because of the success of its chief rival Mastercard. Mastercard came public in May of 2006 and have quintupled since that time. Most investors see Visa as a similar company with just as positive of an outlook. Also, Visa does not carry much risk at all. The company is completely insulated from credit problems and does not carry consumer debt in its statements. The final part of the buzz is the move from paper to plastic by consumers around the world. Visa is a company that seems to have very little risk and a wide economic moat to work with.
Can the company live up to expectations? In my opinion it seems like it can. The trends are all in their favor from consumer spending. The fact is, even in a recession the company does very well since most consumers actually use their credit card more during rough times than they do during prosperous timees.
Can the stock live up to expectations? As I mentioned earlier if it is anything like Mastercard then it will certainly do very well. The valuation still seems pretty fair, so it seems like the stock could be a long-term opportunity. The question will have to be about expectations though. If expectations are for Visa to quintuple right away, it may well fall short, but don't count on this stock being a dog by any means.
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