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Visa 's (NYSE: V) stock has stayed nearly flat this year as the S&P 500 advanced 14%. Macro-headwinds for consumer spending, fears of a recession, and antitrust challenges caused the payment card services provider to lose its luster.

Should investors consider buying and holding Visa's stock as the bulls look the other way? Or should they sell or avoid it until the macro and regulatory headwinds dissipate?

Understanding Visa's business model

Visa is often considered a credit card company, but it doesn't offer any cards. Instead, it only partners with banks and other financial institutions to issue Visa-branded credit cards. Those institutions shoulder all of the credit risk and are responsible for collecting any unpaid debt. They also link Visa-branded debit cards to their own checking accounts.

Visa is only responsible for routing those payments through its massive worldwide-payments network. Visa charges the merchant a "swipe fee" (usually around 1.5% to 3.5%) for each transaction, splits that fee with the card issuer, and keeps the rest as revenue. Visa's main competitor Mastercard (NYSE: MA) uses the same business model.

How fast is Visa growing?

Visa and Mastercard account for over 90% of the payment-processing market outside of China. That near-duopoly makes them both attractive long-term plays on the secular decline of cash-based transactions. Their scale and brand recognition give them wide moats, and they aren't taking on any credit risk from the payments they process.

Visa and Mastercard don't face too much competition from mobile-payment apps, since most consumers still link those apps to their existing credit cards. Merchants also don't have much power to negotiate lower swipe fees, since they would likely lose a lot of customers by cutting them off from the world's two largest card-processing networks.

From fiscal 2013 to fiscal 2023 (which ended last September), Visa's revenue grew at a compound annual growth rate (CAGR) of 11% as its earnings per share ( EPS ) increased at a CAGR of 16%. Its stock has rallied more than 390% over the past 10 years as the S&P 500 advanced less than 180%. It also repurchased over a fifth of its shares during that decade.

But mind the macro and regulatory challenges

Visa looks like an evergreen stock, but it isn't immune to the macro and regulatory headwinds. On the macro front, high interest rates and inflation can impact its growth by throttling consumer spending and reducing its swipe fees.

On the regulatory front, Visa and Mastercard have both faced constant antitrust pressure to lower their swipe fees since 2005. Back in March, the two companies reached a preliminary settlement with several merchant groups to reduce their average swipe fees by at least four basis points over the next three years. They also agreed to cap their fees by at least seven basis points below the current average for the next five years. But in late June, a U.S. judge rejected the settlement's final approval. That setback could force Visa and Mastercard to set even lower fees to settle the case.

Is it time to buy, hold, or sell Visa?

Despite these challenges, analysts still expect Visa's revenue and EPS to grow 10% and 17%, respectively, in fiscal 2024. From fiscal 2023 to fiscal 2026, they expect its revenue to rise at a CAGR of 10% and 14%, respectively. We should take those estimates with a grain of salt, but they suggest its stock is still reasonably valued (but not cheap) at 23 times forward earnings. Mastercard, which faces many of the same near-term challenges, looks a bit pricier at 32 times forward earnings.

I don't think there are any reasons to sell or avoid Visa as a long-term investment right now. Its core business is still growing; it has a deep moat; and it has plenty of pricing power. That said, I'm not sure it's the best time to buy the stock as fears of a recession and an antitrust crackdown squeeze its valuations. So for now, I'd advise you to simply hold Visa's stock if you already own it. I'd buy more shares if it pulls back further, but its upside potential could be limited in this tough market.

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