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."
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free 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
-
I'm 54 with a $320,000 IRA and will soon be self-employed, earning about $120,000 per year. How much should I be saving for retirement?We asked financial experts for advice.
-
This High-Performance Investment Vehicle Can Pump Up WealthLeave online real estate investing to the beginners. Accredited investors who want real growth need the wealth-building potential of Delaware statutory trusts.
-
I'm a Real Estate Investing Pro: This High-Performance Investment Vehicle Can Move Your Wealth Up a Gear
Leave online real estate investing to the beginners. Accredited investors who want real growth need the wealth-building potential of Delaware statutory trusts.
-
These Eight Tips From a Retirement Expert Can Help to Make Your Money Last Through RetirementAre you worried you will outlive your money? Considering these eight tips could go a long way toward ensuring your retirement money lasts as long as you do.
-
I'm an Investment Adviser: This Is the Retirement Phase Nobody Talks AboutWhat you do in the five years before retirement and the first 10 afterward can establish how comfortable you'll be for the rest of your life.
-
Gen X Turns 60: It's Time to Remix Your Retirement PlaylistIf you want a worry-free retirement, you can't keep playing the same old song. You need to freshen up your financial strategies, as well as your music.
-
I'm a Financial Adviser: Here's How a Three-Part Retirement 'Crash Plan' Can Prepare You for Market TurbulenceHaving a plan ready to go when markets get wild — covering how you'll handle income, rebalancing and taxes — can be the ultimate retirement secret weapon.
-
Investors Buy the Nasdaq's Big Dip: Stock Market TodayStocks are up and down again to end an up-and-down week ahead of big earnings announcements and the eventual return of regular economic data flow.
-
Here's How to Plan This Year's Roth Conversion, From a Wealth ManagerWhile time is running out to make Roth conversions before the end of the taxable year, consider taking your time and developing a long-term strategy.
-
Four Times You Need a Second Opinion on Your Financial PlanIs your financial plan fit for purpose — or is your adviser peddling an outdated strategy? When you see these red flags, it's time for a second opinion.Evan
