What happened
Shares of Marqeta (MQ -2.48%), a card issuer and payments processor, fell Thursday after a Wells Fargo analyst downgraded the stock and cut his price target for it.
The tech stock fell by as much as 5.6% during the session, and closed the day down by 1.7%.
So what
Wells Fargo analyst Jeff Cantwell lowered his price target for Marqeta's stock to $7, down from his previous target of $11. He also downgraded the stock from an equal weight rating to an underweight rating.
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In late August, Federal Reserve Chairman Jerome Powell said during a policy speech that the Fed's plan to continue raising interest rates in its fight against high inflation would cause "some pain" for U.S. households and businesses. But failing to do so, he said, would lead to worse pain.
Still, analyst Cantwell views Powell's comments as "decidedly negative" for financial technology companies and he believes that the economy will become "more challenging" for some businesses, according to TheFly.com.
Now what
Cantwell's downgrade and price target cut for Marqeta's stock came ahead of what could be another significant rate hike by the Federal Reserve later this month. Most experts expect another 75-basis point hike to the benchmark federal funds rate following the Federal Open Market Committee's next meeting, which is scheduled for Sept. 20 and Sept. 21.
Rising interest rates tend to lead to declines in consumer spending, and higher borrowing costs also make it more likely that customers will fall behind on their payments. Both of those outcomes would be bad for many fintech companies.
Some investors appeared to be taking Cantwell's opinion to heart Thursday, and with more interest rate hikes coming, further share price drops from Marqeta are likely in the near term.
