Visa sinks more than 5% on pending DOJ antitrust lawsuit

Visa (V) seriously slumped on Tuesday afternoon after reports that the US Department of Justice (DOJ) was intent on bringing an antitrust case against the payments giant for allegedly holding an illegal monopoly over the US debit card market.

Visa is the worst-performing stock in the Dow Jones Industrial Average (DJIA) on Tuesday, down 5.5% at the time of writing. Visa contrasts sharply with Caterpillar (CAT), which has gained nearly as much in percentage terms as Visa has lost.

The DJIA gained 0.2% on Tuesday despite US consumer confidence data that shocked the market by plunging from a month earlier.

Visa stock news

An article in Bloomberg late Monday quotes insiders who say that the DOJ’s Antitrust Division is readying a case to sue Visa for its monopolistic practices in regard to the US debit card industry. The article states that the suit will drop as soon as this week.

Since coming to power, the Biden Administration has upended decades of light-handed regulation toward antitrust issues and begun going after many tech giants. This has included both Amazon (AMZN) and Alphabet (GOOGL). Now it would seem to be Visa’s turn.

One year ago, the Antitrust Division sent Visa investigation demands for paperwork concerning records about its debit card policies. Before that, it was known since at least 2021 that the DOJ had taken a keen look at Visa. According to Bloomberg, the lawsuit will hammer Visa for allegedly engaging in noncompetitive business practices, such as enforcing exclusive contracts that bar banks and other debit card partners from utilizing rival payment processors.

Citi analyst Andrew Schmidt cited the “regulatory overhang” from the pending lawsuit as a reason to switch out Visa stock for Mastercard (MA) as his leading payments stock. Other analysts thought that the uncertainty would simply make Visa a more affordable investment in the near term rather than crimp long-term results.

Visa and Mastercard account for 95% of the total debit card market in the US, and debit cards account for over half of Visa's total purchase volume.

"We believe the DOJ debit review will play out over a long period of time and often these situations get resolved with manageable mitigation,” wrote Wells Fargo analyst Donald Fandetti.

Visa stock forecast

Visa stock sank right to a significant level on the daily chart. That is the area near $272 in which the 50-day, 100-day and 200-day Simple Moving Averages (SMAs) are all trending. The 50-day is now slightly below the other two, marking a bearish Golden Cross pattern.

This makes it more likely that Visa's bad times will continue and that shares will eventually reach the $250 to $228 demand range that saw plenty of action in 2023.

Visa daily stock chart