Bernstein analyst Harshita Rawat notes that Amazon.com Inc (AMZN) will stop accepting UK-issued Visa Inc (V) credit cards starting January 19, 2022. At the same time, Amazon offered some affected customers £ 20 to encourage them to switch to a different payment method.
The analyst noted that the action does not apply to Visa debit cards or Visa credit / debit cards issued outside the UK.
Rawat believes this is “a clear demonstration of Amazon’s power” in its likely ongoing negotiations with Visa on the cost of accepting credit cards.
The news follows announcements of increases in fees for Visa credit cards in Singapore and Australia a few months ago.
The overall financial impact on Visa is negligible, but the analyst believes the news will continue to put pressure on the Visa multiplier until the issue is resolved. This is likely to further exacerbate concerns about large traders who now have the potential to have more power to switch / regulate volumes from cards.
Morgan Stanley analyst James Fawcett said he would become a buyer amid weak Visa headlines linked to Amazon headlines.
He believes that the conflict “reflects” the negotiation process that has been conducted with other major traders in the past and that “usually ends with new pricing agreements.”
While the process is finalizing, he sees minimal risk to Visa’s projected results, added Fawcett, who believes fears about the exchange risk associated with Amazon will “fade over time.”
It maintains an overweight rating and a price target of $ 280 for Visa, which implies 36.5% upside potential.
Barclays analyst Ramsey El-Assal said he sees the move “more as a negotiating tactic, rather than a leading indicator of more fundamental change” in the Visa model. He also sees little, if any, impact on P&L from this move.
The size of Visa’s UK lending business is likely to be dwarfed by the network’s debit business, and Amazon customers will continue to be able to use Visa debit cards. It has a high rating on Visa shares.
Cowen analyst George Michalos did not change his “best” rating on Visa. Michalos remains constructive about Visa and Mastercard Inc (NYSE: MA).
V shares traded 0.75 percent up to $ 203.53 in the market session during the last test on Thursday.
Author: Anusuya Lahiri
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