Option Trade 
Visa Inc (NYSE:V) Calls
Tuesday, April 18, 2017

** OPTION TRADE: Buy the V JUNE 16 2017 90.000 CALL at approximately $2.80. Place a pre-determined sell at $5.50.

Note: No protective stop losses added -- but if you wish to do so make it $1.10.

Also Note: This is a recommendation and individual members can use their own discretion as to when to enter or exit!

by Ian Harvey   

Visa Inc (NYSE: V), a payments technology company, is set to release its next earnings report on Thursday, April 20, after the market closes.

Sell-side analysts are currently looking for Visa Inc. to post quarterly EPS of $0.79. The company posted EPS of $0.68 for the same quarter last year. Most recently, the company reported EPS of $0.86. Prior to the last earnings report, a consensus estimate was for EPS of $0.78. The gap between the estimate and actual number was $0.08 which created a surprise factor of 10.26%.

Visa Inc more or less moved sideways all of last year. But new year, new stock - shares of Visa have rocketed to 15% gains in 2017, displaying rock-solid fundamentals.

Visa was a top performer during the Quarter, bouncing back after detracting during the 4th Quarter. Not much changed over that timeframe; however, constant-dollar payment volume growth and cross border volume growth continued accelerating across several key markets as Visa has gained share, which helped the Company post adjusted earnings per share growth of +23% during the December Quarter.

The recent acquisition of Visa Europe should provide the Company with continued opportunities for growth, not only from a cost savings standpoint but also from a revenue perspective. Several European markets have card payment share that remains significantly under-penetrated relative to cash, when compared to the U.S., so the shift towards e-commerce should continue to aid Visa's value proposition.

The Company maintains a conservative balance sheet, with a substantial amount of offshore cash, and the stock's valuation continues to be attractive, especially relative to the Company's high-teen growth profile for the next several years.

Visa Inc has a 12-month low of $73.25 and a 12-month high of $92.05. The company has a market capitalization of $208.73 billion, a PE ratio of 34.81 and a beta of 1.00. The company has a 50 day moving average price of $89.05 and a 200-day moving average price of $83.61.

Influencing Factors to Consider               

In 2017, consumers will spend an estimated $780 billion globally via their mobile devices. According to estimations, $503 billion worth of via mobile payments could be made in stores in the U.S. alone by 2020.

Europe and Australia are leading the way in the shift to mobile and contactless payment, and Visa has placed itself in the driver’s seat. In Europe, based on Visa data, 1-in-5 Visa payments were made via contactless mobile credit cards between May 2015 and April 2016, amounting to a total of 3 billion contactless Visa transactions. 

Visa's payWave contactless mobile point-of-sale systems were available at 3.2 million POS terminals during that same time. The credit card giant expects the service to be available at all Visa POS terminals in Europe by 2020.

In Australia, an estimated 59% of the population made a purchase with a contactless card in 2016. Visa also recently began experimenting with innovative ways for consumers to use contactless payment methods. Visa, with the help of an Australian startup, introduced contactless payment-enabled sunglasses at a few music festivals in early 2017.

Less than 4 million merchants in 2016 accepted Apple Pay-over 10 million accepted Visa. Apple was thought to soon take over, but its lack of availability has helped place Visa ahead of the mobile payment curve in the U.S.

Over the last year, Visa has surpassed earnings expectations. Visa has very strong comparable P/E ratios.

Maybe most impressively, Visa has strong projected EPS growth. Visa is set to grow profits by double digits based on their massive projected EPS growth numbers.

Visa actively looks for different ways to improve growth potential and revenue streams.

Visa's market cap is currently $206.39 billion, and its stock price has risen steadily. The credit card giant's stock is trading for just under its all-time high at roughly $89 per share.

There are currently over 3 billion Visa cards worldwide, and the company processed $8.2 trillion worth of payments in fiscal 2016, which amounted to $15.1 billion in revenue. The company has also bolstered its relationship with online and mobile payments outlets, including PayPal.

Analysts and Hedge Funds Opinions

Several brokerages have issued reports on the company….

  • Vetr upgraded Visa from a “hold” rating to a “buy” rating and set an $85.82 price target on the stock in a report on Thursday, February 2nd.
  • Sanford C. Bernstein reiterated an “outperform” rating and set a $104.00 price target on shares of Visa in a report on Saturday, March 11th.
  • Morgan Stanley reiterated an “overweight” rating on shares of Visa in a report on Wednesday, March 8th.
  • Finally, Deutsche Bank AG reiterated a “buy” rating and set a $103.00 price target on shares of Visa in a report on Tuesday, March 14th.

Two equities research analysts have rated the stock with a hold rating, twenty-seven have assigned a buy rating and one has given a strong buy rating to the company. The company has an average rating of “Buy” and a consensus target price of $96.19.

Several hedge funds have recently modified their holdings of the company……

  • Investment Management Inc. raised its stake in shares of Visa by 16,443.8% during the fourth quarter, according to its most recent 13F filing with the Securities and Exchange Commission (SEC). The fund owned 860,277 shares of the credit-card processor’s stock after buying an additional 855,077 shares during the period. Weitz Investment Management Inc.’s holdings in Visa were worth $67,119,000 at the end of the most recent reporting period.
  • Also, Sullivan Bruyette Speros & Blaney LLC increased its position in shares of Visa by 0.6% in the fourth quarter. Sullivan Bruyette Speros & Blaney LLC now owns 4,601 shares of the credit-card processor’s stock valued at $359,000 after buying an additional 28 shares during the period.
  • As well, Dumont & Blake Investment Advisors LLC increased its position in shares of Visa by 0.4% in the third quarter. Dumont & Blake Investment Advisors LLC now owns 7,350 shares of the credit-card processor’s stock valued at $608,000 after buying an additional 30 shares during the period.

Harvey’s Options Volatility Indicator

Conclusion

The mobile payment revolution has begun, and Visa has fought to be at the forefront of the new era of monetary transactions.

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

** OPTION TRADE: Buy the V JUNE 16 2017 90.000 CALL at approximately $2.80. Place a pre-determined sell at $5.50.

Note: No protective stop losses added -- but if you wish to do so make it $1.10.

 

”Success is simple. Do what's right, the right way, at the right time.”

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Options traders are not successful because they win.

Options traders win because they are successful.



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