MasterCard Gets Nod Over Visa From Guggenheim

Shares of Visa closed at $118.51 Monday, returning 17% year-to-date, with a 52-week return of 49%.

The shares trade for 17 times the consensus 2013 EPS estimate of $7.09. The consensus 2012 EPS estimate is $6.06.

Darst on Monday left his EPS estimates for 2012 and 2013 unchanged, at $6.05 and $7.15.

Visa last week reported fiscal second-quarter operating earnings of $1.60 a share, increasing 30% from a year earlier, with net operating revenue increasing 15% from a year earlier.

Darst said that Visa's new V.me product, which is a digital wallet service, which will be introduced by the end of the year and will provide"consumers the flexibility to securely pay using one tool regardless or where they are or what type of device they are using with opportunities for personal offers and alerts," could be "a disruptive e-commerce tool relative to current product offerings such as Paypal [a service of eBay (EBAY)] or others in development."

The analyst said that Visa is strategically "positioning the business closer to the consumer and merchants while maintaining focus in the core business," and that "global opportunities are broad, with current initiatives in Brazil, India, and Japan likely to drive near-term results."

A key example of "valuation risk" for Visa, in light of its greater market share, according to Darst, is the Justice Department's civil investigative demand for what Visa said were "documents and information regarding a potential violation of Section 1 or 2 of the Sherman [Antitrust] Act."

Darst's price target for Visa is $130, representing "18x our FY13E EPS," and he maintained his neutral rating on the shares, "given that our price target implies ~7% upside from the current price."

Interested in more on Visa? See TheStreet Ratings' report card for this stock.

-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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