KeyBanc Initiates Visa (V) with a Buy

July 29, 2008 7:54 AM EDT

KeyBanc initiates coverage on Visa (NYSE: V) with a Buy rating and a $94 price target.

The firm said, "In our view, Visa provides an excellent opportunity for investors looking for exposure to the global payment processing industry. Despite the worsening U.S. economy and the potential effects this weakness could have on other economies, Visa should be able to grow its top line by at least 12-15% and its bottom line by more than 20% over the next three years, in our view. We view Visa as a solid long-term holding for any investor, and we believe it is one of the better business models we have seen."

The firm also highlighted positive trends in the company's favor. First, "there is a shift among individuals, companies and government agencies from using cash and checks to pay for goods to paying with credit, debit and prepaid cards." KeyBanc highlights that approximately half of payment transactions and volume were still paper-based in 2006. This provides a vast opportunity for Visa, in the firm’s view. In addition, the rapid growth of debit cards in the United States is another positive trend because V has a dominant presence in the debit card market.

KeyBanc thinks Visa's 3Q08 results will exceed consensus estimates when it reports on Wednesday, July 30, 2008, after the market closes. The expectation is based upon recently reported card data, and their belief "that management is erring on the side of conservatism regarding its margin guidance."

Visa, Inc., through its subsidiaries, operates retail electronic payments networks worldwide.

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