Shares of Visa (V) remain in the spotlight on Thursday following media reports saying Amazon (AMZN) is planning to stop accepting payments made using Visa credit cards issued in the U.K. in 2022, citing high fees to process transactions. Further, the e-commerce giant is also reportedly considering shifting its co-brand credit card to Mastercard (MA) amid simmering tensions with Visa. Commenting on the news, Morgan Stanley analyst James Faucette says the weakness in Visa's shares creates a buying opportunity and believes the conflict "mirrors" the negotiating process seen with other large merchants in the past that "usually ends in new pricing agreements."

AMAZON, VISA CLASH OVER FEES: Amazon plans to stop accepting payments made using Visa credit cards issued in the U.K. starting January 19, 2022, citing the high fees charged by Visa to process transactions, Bloomberg's Alberto Nardelli reported. Customers can still use Visa debit cards, as well as MasterCard and American Express (AXP) credit cards, as well as Visa credit cards issued outside of the U.K., according to an email the retailer sent Wednesday.

Citing people familiar with the matter, Bloomberg's Jenny Surane also reported that Amazon is considering shifting its co-brand credit card to Mastercard amid simmering tensions with Visa. The Amazon card is one of the industry's largest co-branded portfolios, and the company is using talks to renew the agreement as a way to secure better terms from Visa, sources told Bloomberg. Amazon has already started imposing small surcharges on Visa transactions in Singapore and Australia, and announced a deal last week with Venmo giving U.S. shoppers another way to avoid Visa entirely beginning in 2022, Surane pointed out. In an emailed statement to Bloomberg, Amazon said that, "We believe the cost of accepting credit card payments should be going down over time to allow merchants to reinvest savings into low prices and shopping enhancements for customers. Yet despite technical advancements, some cards' cost of payments continue to stay high or even rise."

BUYING OPPORTUNITY: Following the news, Morgan Stanley analyst James Faucette told investors that he would be a buyer amid Visa's weakness related to Amazon headlines, as he thinks the conflict "mirrors" the negotiating process seen with other large merchants in the past that "usually ends in new pricing agreements." While the process plays out, he sees minimal risk to Visa's forecasted results. Faucette believes concerns around interchange risk related to Amazon "should pass with time." He maintains an Overweight rating and $280 price target on Visa shares.

U.K. NEWS 'IMMATERIAL': Baird analyst David Koning believes the news that Amazon U.K. will no longer accept Visa credit cards as of January 19, 2022, is "immaterial" for several reasons, including consumers still being able to use debit cards, which likely generate the same yield to Visa, as well as the U.K. in total being "maybe around 6%" to Visa revenue and Amazon a small part of that. While not material, Koning believes the news is a sentiment headwind, but likes Visa, and expects growth over the next few years to be faster than normal. He has an Outperform rating on the shares.

Commenting on the news, Bernstein analyst Harshita Rawat told investors in a research note that she believes this is "clearly a show of strength by Amazon" in its likely ongoing negotiations with Visa over the cost of credit card acceptance. The overall financial impact to Visa is negligible, but the analyst does believe that this news will continue to weigh on Visa's multiple until this gets resolved. This will very likely further intensify concerns regarding large merchants now potentially having greater power with regards to shifting/steering volumes away from cards, Rawat contended.

Voicing a similar opinion, Barclays analyst Ramsey El-Assal views the move as "more of a negotiating tactic, rather than a leading indicator of more fundamental changes" to Visa's model, and sees little profit & loss statement impact, if any, from the move. The size of Visa's credit business in the U.K. is believed to be "dwarfed" by the network's debit business and Amazon customers can still use Visa debit cards, El-Assal said. He has an Overweight rating on Visa shares.

Jefferies analyst Yvonne Jeng also believes that while Amazon's ban on Visa credit cards in the U.K. and potential switch to MasterCard for Prime co-brand adds another concern "to an already long list weighing on sentiment," there should be "miniscule P&L risk." The analyst believes Amazon is either trying to pressure Visa to lower EU-U.K. cross-border interchange on credit, using the move as a negotiation tactic for a co-brand renewal, or networking fees elsewhere. Overall, Jeng thinks MasterCard is likely to continue to outperform Visa after the news, but with the latter's valuation at 3-times below pre-COVID and a 20% discount to MasterCard, she sees a favorable risk/reward for Visa over the next 12 months.

PRICE ACTION: In Thursday morning trading, shares of Visa have dropped about 2% to $201.57 after having fallen in Wednesday's trade.