Visa ‘dominance is likely inevitable,’ says Morgan Stanley

Morgan Stanley expects that there is little variance in the types of servers and network equipment that can be purchased to run payment networks, so the overall cost of transaction is really determined by the investment in that equipment infrastructure. Given that Visa (V) is already the largest with the most redundancies and reach, the firm believes Visa “will likely always have a cost advantage,” unless a competitor, or aspiring competitor, is able to develop a solution that uses significantly cheaper compute and networking equipment. In this context, the firm thinks that Visa’s “dominance is likely inevitable” as the company’s network performance is highly efficient and it does not see a clear path for competitors to achieve a lower cost base. Morgan Stanley maintains an Overweight rating and $322 price target on Visa shares.