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.
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.
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.