Goldman Sachs (GS) reacted by increasing their price target on Visa Inc. (V) to $85, and kept their “Buy” rating on the stock. Barclays Capital (BCS) followed suit by upping their price target on Visa to $97. RBC Capital however lowered their price target from $100 to $92 and JPMorgan Chase (JPM) cut their price target on Visa the back in January from $103 to $85. If you take the latest analyst action, that implies the average of return for Visa shares in the next 12 months at around 19.8%.

Visa shares could come back, don’t forget  it had the largest IPO in U.S. history back in 2008 valued at $17.9 billion. However, now that all the hype is over and as we slowly recover from the greatest downturn since the Great Depression, Visa shares don’t have that same appeal as they did back in 2008. By the time most investors had the chance to buy Visa in March of 2008 they were trading around $65, compare that to Friday’s close of $74.93, that works out to a 16.4% increase. MasterCard shares have gained 464% since they went public back in 2006 and America Express has gone on a 1,794% run since 1978. When the greatest IPO of 2008 can’t even beat the Dow Jones or S&P 500 in the past year what does say about their management?

On the Feb 2nd conference call Visa’s CEO Joseph Saunders who’s run the show since 2007 said:

“Visa’s first quarter was a great start to our fiscal 2011 as evidenced by strong earnings fueled by continued growth in payments volume, cross border volume and processed transactions globally – our core business.”

A fine pep talk indeed and after all the analysts weighed in after the call Visa shares have inched up 3.9%. Wall Street may think Visa shares could rally 19.8% on average over the next 12 months, but the trading has yet to demonstrate the price target could be hit.

Question Mr. Saunders: What’s more embarrassing than finding a Kardashian card credit in your wallet? How about losing all your credit cards.

That’s what happened to Joseph Saunders in late 2008 when the market was falling hard:

“I’m supposed to start off, and say that I’m very happy to be here, and I guess I am. But it’s 4:15 in the morning as far as I’m concerned, and I lost my wallet on the way here,” Saunders said. “It’s rather embarrassing when somebody steals my credit cards.” The comment prompted laughter.

DUDE WHERE’S MY CREDIT CARD

Americans aren’t using their plastic like they used to and even if things pick-up, imagine the devastation to Visa’s profit margins if the 12 cents per debit-card transaction becomes a reality. Saunders may have found his credit cards, but most of us have thrown them away. Overall revolving credit, 98% of which includes credit cards, inched up 3% in December to $800.5 billion from $798.2 billion a month earlier, reversing a 25-month trend of steady declines throughout the recession. Credit card borrowing peaked at $976.8 billion in October 2008. That’s good news for Visa, but the days of rapid growth are over, our spending habits have changed forever since 2008. The consensus for the 3% growth in December was seasonal spending and nothing more. Visa Inc. has much to prove to investors, can it beat its competitors, will its lobbying efforts be successful to fend off the 12 cent cap threat, and will the analysts 19% average ROI come true?

Tough questions when deciding if there is value left in Visa (V) shares, perhaps Kim Kardashian can provide some comfort:

“I know people think we drive around in these nice cars and we do whatever we want and our parents will pay our credit cards, but that’s not the case.”

Credit card use has inched up, but it a bold statement to say the “charge it” mentality has returned in America. Besides, if the Kardashians aren’t going to pay for their children’s credit card bills, how can shareholders hold out hope the glory days will return for Visa?

The battle for payment method in the 21st century is with mobile devices, iPhone and Andriod phones will one day replace our credit cards (or so how the thinking goes) and the winners will be eBay’s Paypal (EBAY), Google (GOOG) or Apple Inc. (AAPL). PayPal revenues are expected in the range of $6 billion to $7 billion in 2013, driven by consumer preferences, market expansion, and innovation in the areas of mobile, digital, social and local.

Bottom line: Its not up to wallet friendly CEO Joseph Saunders to return Visa (V) to greatness, the consumer will ultimately decide the fate of credit card companies and our government will be right there with them setting the rules.

Frank A. Lara Jr

The author holds no positions in any of the securities mentioned in this publication.