Visa Inc (NYSE:V) shares fell nearly 5% on Tuesday and continued trading lower on Wednesday following reports that the Department of Justice is suing the payment giant for allegedly monopolizing the country’s debit card market.
The lawsuit accuses Visa of engaging in anti-competitive practices, casting fresh scrutiny on the company’s dominance.
This news comes on the heels of Alphabet Inc‘s (NASDAQ:GOOGL) (NASDAQ:GOOG) antitrust battle earlier this month, which caused a temporary dip in the tech giant’s stock before it rebounded by about 10%.
Some investors may wonder if Visa’s stock could follow a similar trajectory.
Visa has long been in the regulatory crosshairs, facing accusations that it uses volume-based discounts to discourage merchants from shifting debit transactions to rival networks.
Brokerage TD Cowen noted that the Justice Department must prove that Visa’s discounts act as barriers to entry, preventing competitors from driving down prices.
While analysts agree this lawsuit poses immediate downside risks, they caution that antitrust cases are notoriously slow-moving.
KBW estimates that Visa’s U.S. debit business accounts for around 10% of its total revenues, and while the lawsuit may drag on, its long-term financial impact may be limited.
Is Visa Stock Offering A Buying Opportunity?
Visa’s recent stock action has caught traders’ attention.
Visa stock is trading below all its moving averages, signaling a bearish trend.
The eight-day and 20-day simple moving averages of $283.96 and $281.81, respectively, indicate a short-term bearish signal, with Visa’s current price at $269.78. Moreover, the stock sits just below its 50-day and 200-day averages, reinforcing the bearish momentum.
However, any correction in the stock from this level could set the course again for a long-term bullish streak.
The Moving Average Convergence Divergence (MACD) is showing a bullish 2.53, while the declining Relative Strength Index (RSI) of 39.43 suggests Visa stock could soon be oversold.
As investors weigh the impact of the DOJ lawsuit, Visa’s stock may present a near-term buying opportunity, much like Alphabet’s rebound earlier this month.
