Visa (V): Buy, Sell, or Hold?

I have to agree that Visa runs a great business model. The company makes money on the credit card transaction itself and does not provide the actual credit to consumers like American Express and Chase. So if the consumers default on their credit cards, the lender of the card will be on the hook, not Visa. With this kind of business model, it seems like the Visa stock has great potential with little downside risk, right? I don't believe so. Why? 62% of Visa's business is derived from the U.S. With more banks failing each week, it's just a matter of time that new credit cards will be difficult to obtain and limits will be drastically reduced for cardholders. This reduced credit consumption will mean less transactions for Visa which will not bode well for the stock. Another potential pitfall I see is that the international markets (38% of revenues) will not be growing as fast as what management is predicting. With the prolonged U.S. recession, it's difficult to imagine that the rest of the world will not be affected. With credit contraction and dramatic reduced consumer spending, I don't see much upside to the stock especially when V ($73.60) is trading at lofty levels relative to its forward P/E. I would not be a buyer until I see a sustained economic recovery in the U.S. which could be several years from now.

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