Citi has decided to shift its preference from Visa Inc. (NYSE: V) to Mastercard Inc. (NYSE: MA) following news that the US Department of Justice (DOJ) is set to file an antitrust lawsuit against Visa.
According to sources cited by Bloomberg, the lawsuit, expected as soon as Tuesday, will accuse Visa of engaging in monopolistic practices, particularly in the debit card market.
This regulatory pressure has prompted Citi to make the switch to Mastercard, even though the latter faced its probe in 2023.
DOJ’s antitrust case against Visa
The DOJ began investigating Visa in 2021, looking into whether its business practices violated antitrust laws.
Visa has consistently maintained that its operations comply with legal standards.
However, in recent months, additional information has come to light, suggesting that Visa may have employed tactics to limit competition in the US debit card market.
In June, Discover Financial Services’ Pulse Network settled a lawsuit that accused Visa of stifling competition, which led to higher fees for merchants.
Visa has yet to comment on the latest DOJ developments, nor has the DOJ issued a formal statement.
Visa’s stock has fallen more than 2% following the news but remains up 13% over the past two months, paying a dividend yield of 0.72%.
Mastercard gains momentum
Citi’s move to Mastercard may signal growing investor confidence in MA, particularly as Visa faces legal uncertainties in its largest market.
Visa derives nearly half of its revenue from the United States, making it more vulnerable to litigation risks moving forward.
In contrast, Mastercard has greater international exposure, which could give it a more stable growth trajectory in the coming years.
Analysts are forecasting a strong financial outlook for Mastercard, expecting the company’s total sales to rise by 12% to $31.23 billion in fiscal year 2025.
Earnings per share (EPS) are projected to grow by 15%, outpacing Visa’s expected 10% sales growth and 12% EPS increase over the same period.
Mastercard also boasts a robust gross margin of 76.91%, only slightly trailing Visa’s 77.30%.
Its strategic investments in blockchain technology and digital identity solutions position it well for future growth.
Mastercard’s acquisition of Vocalink for $920 million in 2016 has further strengthened its foothold in the real-time payments space.
Should you consider Mastercard over Visa in 2025?
With Visa facing potential legal battles in its primary market and Mastercard expanding its international presence, the latter may appear more attractive to long-term investors.
Mastercard’s focus on innovation, including its investments in blockchain and digital identity, could drive sustained growth, while Visa’s US revenue stream may remain under pressure due to regulatory scrutiny.
Market analysts, including Crispus Nyaga, continue to maintain a bullish outlook on Mastercard, citing its strong financial performance and growth potential despite Visa’s recent stock gains.
As regulatory challenges loom for Visa, Mastercard’s diversified revenue base and forward-thinking strategy may make it the better pick for 2025.
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