Payment processing and technology companies Visa (NYSE:V) and Mastercard (NYSE:MA) have agreed to settle a long-standing dispute over credit interchange rates with U.S. merchants. Both entities have independently declared a reduction in swipe fees borne by U.S. merchants when customers utilize credit cards for purchases.
In addition to the fee reduction, Visa and Mastercard have said that the interchange rates will be capped at the lowered level for five years. Furthermore, merchants will gain increased flexibility at the point of sale, allowing them to direct transactions toward preferred payment methods. However, the finalization of this settlement is contingent upon approval by the Eastern District Court of New York.
Here’s What Analysts Said
In response to the announcement, Robert W. Baird analyst David Koning views the settlement as removing the long-standing uncertainty surrounding the litigation, which spanned over two decades. He believes that the decreased credit interchange rates will enable the companies to prevent merchants from shifting to alternative payment methods, ultimately contributing to Visa and Mastercard’s market share growth. Koning maintained a Buy rating for Visa and Mastercard stocks.
Meanwhile, Mizuho Securities analyst Dan Dolev said that the interchange rate cap could constrain Visa and Mastercard’s pricing power in the medium term. However, he acknowledges that this agreement will alleviate regulatory pressure on both companies and mitigate the risk of further reductions in interchange fees until 2030. Dolev is bullish about Visa and Mastercard’s prospects.
Notably, Visa and Mastercard stocks have gained about 27.5% and 35.3%, respectively, over the past year. Higher payment volume growth drove their financials and share price.
What is the Outlook for Visa Stock?
With 22 Buys and one Hold recommendation, Visa stock sports a Strong Buy consensus rating. Analysts’ average price target on V stock is $307.32, implying an upside potential of 9.52%.
Is Mastercard a Buy, Sell, or Hold?
28 out of 29 analysts covering Mastercard stock recommend a Buy, and one recommends a Hold. Overall, MA stock has a Strong Buy consensus rating. Analysts’ average price target on MA stock is $513.82, implying an upside potential of 7.76%.
