Analysts Remain Divided Over Amazon's Crusade On Visa

Bernstein analyst Harshita Rawat notes that $Amazon(AMZN.US)$ would stop accepting $Visa(V.US)$ credit cards issued in the U.K. starting on January 19, 2022. At the same time, Amazon offered some affected customers £20 to incentivize them to switch to another payment method.

What Happened: The analyst pointed out that the action does not affect Visa debit cards or Visa credit/debit cards issued outside the U.K.
Rawat believes this is "clearly a show of strength by Amazon" in its likely ongoing negotiations with Visa over the cost of credit card acceptance.
The news follows surcharging announcements on Visa credit cards in Singapore and Australia a few months ago.
The overall financial impact to Visa is negligible, but the analyst does believe that this news will continue to weigh on Visa's multiple until this gets resolved. It will likely further intensify concerns regarding large merchants now potentially having greater power regarding shifting/steering volumes away from cards.

Morgan Stanley analyst James Faucette said he would be a buyer amid Visa's headline weakness related to Amazon headlines.

He thinks the conflict "mirrors" the negotiating process seen with other large merchants in the past that "usually ends in new pricing agreements."

While the process plays out, he sees minimal risk to Visa's forecasted results, added Faucette, who thinks concerns around interchange risk related to Amazon "should pass with time."

He maintains an Overweight rating and $280 price target on Visa, implying a 36.5% upside.

Barclays analyst Ramsey El-Assal said he views the move as "more of a negotiating tactic, rather than a leading indicator of more fundamental changes" to Visa's model. He also sees little P&L impact, if any, from the move.

The size of Visa's credit business in the U.K. will likely be "dwarfed" by the network's debit business, and Amazon customers can still use Visa debit cards. He has an Overweight rating on Visa shares.

Cowen analyst George Mihalos made no change to his Outperform rating on Visa. Mihalos remains constructive on Visa and $MasterCard(MA.US)$ .