Visa & Mastercard Get DOJ Curveball (V, MA)

Visa, Inc. (NYSE: V) and Mastercard Incorporated (NYSE: MA) should both be trading higher this morning if you were only looking at the earnings reports from Wednesday.  Both credit card processing outfits beat earnings and are in solid shape.  But…

The trick is that Visa divulged in a filing that the Department of Justice has a civil investigative demand as an official request for information over its pricing structure and over recent pricing adjustments.  It needs to be known that Visa has received inquiries of this nature before and the CEO noted that it could take up to a year to resolve.

Perhaps what is of a larger concern to investors is that this inquiry came in March, and it is now May.  Even if it came at the very end of the month that means that Visa sat on the news for a whole month allowing its shares to rise from $118 to $125 before it divulged the news.

Visa shares hit $125.25 on May 1 as a new high and pulled back on Wednesday to $122.19 before the drop of 1.5% to $120.40 this Thursday.  Mastercard hit a high of $466.98 on May 1 and pulled back to $451.45 on Wednesday before its 0.6% drop this morning to $448.20.

Department of Justice inquires do not mean that anything wrong has been done, but right now investors treat any form of investigation with caution.  It is caution that should be expected, and frankly the stocks have held up better than many might have expected.  This won’t be going away any time soon and we would expect that analysts will be chiming on this matter for the rest of the week.

JON C. OGG