Visa (V) stock is lower Wednesday, extending Tuesday's 5.4% decline, after the Department of Justice (DOJ) said it is suing the payments processing giant for "exclusionary and anticompetitive conduct."
The DOJ's complaint accuses Visa of having a monopoly over the debit card market and claims it uses its dominance to prevent competition. By preventing competition, the Justice Department says that the company is able to charge more for processing transactions than it would in a competitive market.
"We allege that Visa has unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market," said Attorney General Merrick B. Garland in a statement. "Merchants and banks pass along those costs to consumers, either by raising prices or reducing quality or service. As a result, Visa's unlawful conduct affects not just the price of one thing – but the price of nearly everything."
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
More than 60% of debit transactions in the U.S. run on Visa's debit network, the DOJ said, which it charges more than $7 billion in fees to process. It added that the credit card company prevents competition by imposing exclusionary agreements on merchants and banks and penalizes them if they route transactions through a different debit network or payment system.
"Anticompetitive conduct by corporations like Visa leaves the American people and our entire economy worse off," said Principal Deputy Associate Attorney General Benjamin C. Mizer in a statement.
The DOJ is asking that the court to stop Visa from several anticompetitive measures detailed in the lawsuit, including bundling credit services and imposing pricing or incentive structures.
Visa responded by calling the Justice Department's lawsuit "meritless," according to CNBC.
"Anyone who has bought something online, or checked out at a store, knows there is an ever-expanding universe of companies offering new ways to pay for goods and services," said Visa General Counsel Julie Rottenberg in a statement. "Today's lawsuit ignores the reality that Visa is just one of many competitors in a debit space that is growing, with entrants who are thriving."
Is Visa stock a buy, sell or hold?
Visa is up roughly 5% for the year to date on a total return basis (price change plus dividend), yet Wall Street remains bullish on the Dow Jones stock.
According to S&P Global Market Intelligence, the average analyst target price for V stock is $305.84, representing implied upside of more than 13% to where it's trading as of this writing. Additionally, the consensus recommendation is Buy.
Financial services firm Baird is one of the more bullish outfits on the blue chip stock with an Outperform rating (equivalent to a Buy) and a $320 price target.
"We like Visa as a steady compounder, but understand investor fear of regulatory scrutiny, the U.S. total addressable market (TAM) becoming penetrated, and pressure on incentives," says Baird analyst David Koning.
Nevertheless, the analyst thinks Visa is attractively valued at current levels and likes the company's "high-quality earnings stream, secular growth, and value-added services growth."
Related Content
-
How to Organize Your Financial Life (and Paperwork)To simplify the future for yourself and your heirs, put a financial contingency plan in place. The peace of mind you'll get is well worth the effort.
-
Financial Confidence? It's Just Good Planning, Boomers SayBaby Boomers may have hit the jackpot money-wise, but many attribute their wealth to financial planning and professional advice rather than good timing.
-
How to Organize Your Financial Life (and Paperwork)
To simplify the future for yourself and your heirs, put a financial contingency plan in place. The peace of mind you'll get is well worth the effort.
-
Financial Confidence? It's Just Good Planning, Boomers Say
Baby Boomers may have hit the jackpot money-wise, but many attribute their wealth to financial planning and professional advice rather than good timing.
-
Will You Be Able to Afford Your Dream Retirement?You might need to save more than you think you do. Here are some expenses that might be larger than you expect, along with ways to ensure you save enough.
-
More SECURE 2.0 Retirement Enhancements Kick in This YearSaving for retirement gets a boost with these SECURE 2.0 Act provisions that are starting in 2025.
-
Saving for Your Emergency Fund: As Easy as 1-3-6An emergency fund that can cover six months' worth of expenses is far easier to build if you focus on smaller goals at first.
-
Stock Market Today: Dow Slides 697 Points on Super-Hot Jobs DataWhen the December nonfarm payrolls report hit the tape, there was no question which way stocks would go at Friday's opening bell.
-
Blowout December Jobs Report Puts Rate Cuts on Ice: What the Experts Are SayingJobs Report The strongest surge in hiring since March keeps the Fed on hold for now.
-
Constellation Energy Stock Soars on Its $26 Billion Buy. Here's Why Wall Street Likes the DealConstellation Energy is one of the best S&P 500 stocks Friday after the utility said it will buy Calpine in a cash-and-stock deal valued at $26 billion.
