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Why Credit Card Stocks Got Hit Hard Today

By Joe Tenebruso - Updated Mar 3, 2020 at 6:26PM

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We've yet to see the worst of the coronavirus-related fallout, according to this industry titan.

What happened

Shares of Mastercard (MA 4.34%), American Express (AXP 3.18%), Discover Financial (DFS 5.39%), and Capital One (COF 5.64%) all fell by approximately 5% on Tuesday, following Visa's (V 4.51%) warning of a revenue shortfall due to the coronavirus outbreak. 

So what 

Visa said in a filing on Monday that the outbreak of COVID-19, the disease caused by the novel coronavirus, has resulted in a "sharp slowdown" in its cross-border business, due in part to a significant reduction in travel to and from Asia.

"Cross-border growth rates have deteriorated week by week since the coronavirus outbreak in China, and trends through February 28, 2020 do not yet fully reflect the impact of the coronavirus spreading outside of Asia," Visa said. "As such, we anticipate that this deteriorating trend has not bottomed out yet."

While cautioning that uncertainty related to the spread of COVID-19 makes it impossible to accurately forecast its impact, Visa said that it currently expects its fiscal second-quarter revenue growth to be roughly 3% lower than its previous forecast. Based on its Q1 2019 results, that would equate to a revenue shortfall of about $165 million. 

A digital display showing falling prices

Credit card stocks fell across the board on Tuesday. Image source: Getty Images.

Now what

Both Visa and Mastercard have now cut their revenue guidance in response to the coronavirus epidemic, and investors are logically deducing that American Express, Discover, and Capital One will be similarly impacted by the disease and its related fallout. Travel bans, supply-chain disruptions, and reduced consumer discretionary spending could all bring about a downturn in the global economy, and these payment companies are likely to see their businesses suffer at least to some extent, particularly if we fall into a recession.

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Stocks Mentioned

American Express Company Stock Quote
American Express Company
AXP
$146.15 (3.18%) $4.50
Capital One Financial Corporation Stock Quote
Capital One Financial Corporation
COF
$110.09 (5.64%) $5.88
Mastercard Incorporated Stock Quote
Mastercard Incorporated
MA
$330.50 (4.34%) $13.74
Visa Inc. Stock Quote
Visa Inc.
V
$205.51 (4.51%) $8.87
Discover Financial Services Stock Quote
Discover Financial Services
DFS
$99.17 (5.39%) $5.07

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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