Visa turns bearish on Equifax data breach

Credit card issuer, Visa Inc. (NYSE: V) reported better than anticipated fiscal 2017 second-quarter results in July. The company also raised its full-year 2017 estimates.

The impressive results had enabled the stock to appreciate by about 5% to $105, so far.

However, we anticipate a decline in the stock price due to a major cyber security breach that has compromised the personal data of about 200,000 card holders.

The Foster City, California-based company reported a 26% y-o-y increase in the Q2 2017 operating revenue to $4.57 billion. Net income for the quarter ended June 2017 was $2.06 billion, or $0.86 per share, compared with $412 million, or $0.17 per share, in the similar period last year.

Equifax, an Atlanta, Georgia-based consumer reporting agency, announced September 7 that hackers had gained unauthorized access to its database, and personal details of 143 million people were compromised. Equifax has also assured that this incident will not likely result in an identity takeover and confirmed its readiness to offer free suggestions to the affected people.

ABC News

On the basis of the alert issued by Equifax, Visa is sending out warnings along with a list of stolen credit card numbers to its clients. Even though Equifax has estimated that hackers had access to the database only between mid-May through July 2017, Visa has widened the window of exposure to between November 10, 2016 and July 6, 2017.

The company stated that the hacked data include names, email addresses, date of birth, and telephone numbers, but does not contain any other financial information, passwords, or postal addresses. Visa, which can handle as many as 65,000 transaction messages per second, has not revealed the total number of clients who were affected by the incident. However, a rough estimate puts the figures at 200,000. Analysts believe that the final figures would be much higher as Equifax had mentioned that data pertaining to 143 million people have been stolen.

Equifax has also stated that its UK systems were not impacted by the hacking incident, but information on some British customers may have been stolen as limited amount of UK data were available on the US server between 2011 and 2016.

Visa, the global leader in digital payments, assured customers that the company’s zero liability protection policy safeguards clients against fraudulent purchases. Even though the incident is not going to affect the bottom line of the company, still, investors would stay away from the company until full details about the hacking incident is available for assessment of potential damage. Thus, fundamentally, the stock is expected to turn bearish in the week ahead.

The stock of Visa is facing resistance at 105.80. After staying in the bullish zone for nearly two months, the stochastic oscillator has started declining below the reading of 80. Thus, we anticipate a decline in the share price. The next major support for the stock is at 103.

We are considering the possibility of purchasing a put option valid until September 28, to gain from the impending downtrend. Once we spot a suitable binary option contract, we shall purchase it when the stock trades near $105 in the NYSE.

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