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[source: Schaeffers Research, Elizabeth Harrow]The credit-card company could be hit with downgrades after offering a very cautious outlook
For a while there, it looked like Visa Inc. was relatively well-protected from the financial crisis. Since the company doesn’t actually supply credit to cardholders, it seemed as though Visa would continue to benefit as consumers increasingly favor plastic over cash for transactions. Today, some of these high hopes have been dashed by cautious comments from the credit-card concern.
In its 10-K filing, Visa warned that it could incur significant severance charges in fiscal 2009, as it “continues to evaluate alternatives for achieving synergies in the global organization.” Among the many risks to its bottom line are: penalties related to litigation settlements; costly new compliance burdens due to increasing global regulatory focus; intense competitive pressure on customer pricing; consolidation in the banking industry; negative trends in consumer spending and cross-border travel; and adverse currency fluctuations.
Speaking of litigation settlements, word also hit the Street today that Visa received its fourth civil investigative demand from the Department of Justice regarding potential antitrust violations. In its regulatory filing, Visa said it is cooperating with the DoJ in connection with its request for information.
Why Visa Inc. Stock Is Falling Today
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