Pandemic Resurgence Fears Send U.S. Payments Stocks Sliding
(Bloomberg) -- U.S. payments-related stocks fell on Monday as investors braced for the return of Covid restrictions and lockdowns to cut into international travel and spending.
The Bloomberg Digital Payments Index fell 2.4% to touch its lowest level since December. Shares of Mastercard Inc. sank for a fourth straight day, falling 5.4%, while rival credit card stocks Visa Inc. and American Express Co. also dropped.
“It’s kind of like the perfect storm for some of these names,” said Mizuho analyst Dan Dolev. Sentiment has taken a hit as the coronavirus news adds to existing secular concerns, a reset in growth drivers and the possibility of regulatory changes for the sector following Jerome Powell’s nomination for a second term as Federal Reserve chair, he added.
Payments peers including PayPal Holdings Inc., Square Inc. and Affirm Holdings Inc. all generated losses for the day of at least 2%, with Marqeta Inc. down by 10%. Some of these companies may have also been hit by recent declines in Bitcoin, because they offer crypto payments or related services now, Dolev said.
Shares of both Visa and Mastercard have experienced a wave of selling pressure in recent days after Amazon.com Inc. ratcheted up its fight against credit card transaction fees. The e-commerce giant said last week it would no longer accept purchases made with Visa credit cards in the U.K. starting next year.
“The Amazon/Visa dispute is tiny in terms of money but massive for what it may represent over time,” wrote Vital Knowledge’s Adam Crisafulli.
The possibility of more Covid-related lockdowns across Europe threatens to further damage investor sentiment toward credit card names, especially those with heavy international exposure. Customers outside the U.S. account for more than 50% of revenue for both Mastercard and Visa and about 44% for PayPal, according to data compiled by Bloomberg.
During the company’s October earnings call with analysts, Visa Chief Financial Officer Vasant Prabhu said the recovery in cross-border spending would depend on the status of border openings, while warning that “forecasting the trajectory of the return to normalcy remains difficult.”
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