Visa Backdoor Buyback Spurs Goldman Call (Update 1)

Visa article updated to clarify that Visa deposited the funds in a litigation escrow account. A previous version of this article stated Visa had transferred the funds to a litigation reserve.

NEW YORK ( TheStreet) -- Visa ( V) saw its price target and estimates raised by Goldman Sachs Tuesday following a Dec. 23 announcement that Visa had deposited $1.565 billion in a litigation escrow account. According to Goldman's analysts, the move has the same effect as a share repurchase.

Visa used funds from its stock repurchase program to fund the existing litigation escrow account, according to a Dec. 23 regulatory filing by Visa.

"This deposit has the same effect as a repurchase of $1.565 billion of Class A common stock on an as-converted basis, since the holders of Class B shares (financial institution shareholders, which as of 4QFY11 held 17.5% Class A equivalent shares) bear a corresponding financial impact via a reduction in their "as-converted" share count," states a note from a team of Goldman analysts led by Julio Quinteros.

Goldman, which has a "Buy" rating on Visa, upped its 12-month price target for Visa to $114 from $110. The analysts also raised 2012 estimates to $6.04 per share from $5.87, while also lifting estimates for 2013 and 2014.

While Visa has now exhausted its share repurchase program, Goldman's analysts see it resuming in June 2012.

"One of the key elements underpinning our positive view on Visa shares is the earnings defensiveness offered by the model given its growth profile in payments and capital stewardship," the note states.

Visa shares were down 0.16% to $102.32 in afternoon trading on Tuesday. Shares of MasterCard Inc. ( MA), meanwhile, were down 0.61% to $375.89.

-- Written by Dan Freed in New York. Follow this writer on Twitter.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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