Visa's newly minted stock surged into the upper $60s today but is now closer to $59 in the final hour of trading. How much is the stock worth? Morningstar analyst Michael Kon estimates Visa's fair value at $74 a share. Writes Kon:
Visa benefits from the secular growth in the use of cards all over the world. We think growth will continue; our base assumption is that processed transactions will grow, on average, by 14% over the next eight years and payment volume—the dollar amount of purchases that flow through the Visa network—will grow by 9% annually over the same period. We also assume that Visa will be able to raise prices by about 5% over the next two years. This results in a revenue growth assumption of 12%, on average, over the next eight years. If Visa manages to grow revenue by only half of our expected growth rates, we would have to cut our fair value to around $37 per share.
Bespoke Investment points out that Visa's market capitalization is currently more than double that of MasterCard.