Visa stock sell-off, induced by DOJ suit, creates buying opportunity: Morgan Stanley

Shares of payments network titan Visa (NYSE:V) shed 5.5% on Tuesday after the U.S. Justice Department sued the company for allegedly maintaining an illegal monopoly in the debit card market. But Morgan Stanley thinks the correction was an “overreaction” and “represents a compelling buying opportunity as any financial impact to the company is likely to be small,” he wrote in a note to clients on Wednesday.

“Historically, negative reaction to regulatory headlines have been good buying opportunities,” analyst James Faucette noted.

The DOJ complaint accused Visa (V) of penalizing merchants and banks that opt for alternative payment processing technologies for debit transactions, despite the availability of other options. Visa, in turn, earns extra fees on each transaction processed through its network.

Faucette, maintaining his Overweight rating on Visa (V), expects the initial trial process likely will persist for multiple years, “with subsequent appeals likely to add a year or more to the total legal process.”

His Overweight rating diverges from the SA Quant system rating of Hold and aligns with the average SA analyst rating and the average Wall Street analyst rating, both at Buy.

Meanwhile, the antitrust suit prompted Citi analyst Andrew Schmidt to shift his preferred card network stock to Mastercard (MA) from Visa (V). He still rates Visa stock Overweight, though, noting that regulatory events, such as these, have historically been good buying opportunities for network stocks.

Visa (V) shares slipped 0.4% minutes after Wednesday’s opening bell.