Mastercard stock now offers a balance of risks and potential rewards, according to experts. Mastercard (MA) stock represents a good investment opportunity following a drop that has left its shares down 7% year to date.
Unmistakably one of the leading firms in the payment technology market, Mastercard Inc. helps manage transactions for billions of consumers, businesses, and large banks. A global pioneer, the company, has helped enhance payment innovation worldwide to connect individuals and make handling cash much easier through a digital economy.
Notably, like many businesses, Mastercard has felt the impact of the COVID-19 pandemic. Rising unemployment and social distancing measures reduced consumer spending in many key markets, from entertainment to travel.
As a result, Mastercard’s revenue dropped in 2020. But for investors willing to see past the present, Mastercard’s culture of innovation positions the company for strong growth in the years ahead. So Mastercard stock: is it a buy, hold or sell right now? Read on to find out.
Mastercard: Leading In The Digital Payments Sector
Thanks to the increasing shift towards digital payments, investing in the Mastercard stock now is likely to pay off in the coming years.
The world is becoming more digital, and the COVID pandemic has only accelerated that trend. According to research conducted by Mastercard, digital B2B payments are the new normal for many businesses across the globe. In an effort to improve cash flow, many small businesses have adopted a digital service like payment collection or electronic invoicing. This trend should drive the adoption of B2B payment products like Mastercard Track, helping the company grow its revenue.
Mastercard reported similar trends in consumer spending. More consumers are making purchases through digital channels, as the pandemic has accelerated the adoption of e-commerce around the world. For instance, roughly 11% of total retail sales in the United States occurred online in 2019, but that figure doubled to 22% in April and May 2021, as business closures and social distancing kept consumers at home.
Notably, Mastercard is forecasting a significant increase in e-commerce sales in the coming years. This should boost revenue in two ways: increasing Mastercard’s payment and transaction volume and allowing Mastercard to offer additional value-added services.
For instance, Mastercard’s Digital Enablement Services (MDES) provides tokenization, helping customers like Amazon and MercadoLibre prevent fraud by allowing consumers to store and use payment cards online securely. Together, these trends are the driving force behind Mastercard’s enormous market opportunity.
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Mastercard: Future Outlook And Fundamentals
Know what’s in the road ahead for Mastercard before buying the Mastercard stock.
Mastercard’s platform connects thousands of financial institutions and millions of merchants in over 210 countries and territories. This creates a network effect and forms the foundation of Mastercard’s competitive advantage: each new consumer adds value for all existing merchants, and each new merchant adds value for all consumers.
But this scale also creates cost advantages, meaning revenue increases can have outsized impacts on operating income. This allows Mastercard to achieve a higher operating margin than smaller competitors, meaning it can outspend rivals in areas like research and development or sales and marketing without compromising profitability.
Recent Updates And The Road Ahead
Mastercard has been pretty aggressive in its investments into the cryptocurrency space recently. The firm completed the acquisition of CipherTrace, a cryptocurrency intelligence company that helps prevent fraud and protects digital assets.
In addition, in September, Mastercard launched its buy now pay later service called Mastercard Installments. This offers interest-free consumer financing over a period of four instalments. Mastercard will not be lending any money, but it’s providing its network to banks like Barclays and fintech like SoFi Technologies.
Is Mastercard Stock A Buy, Hold, Or Sell Right Now?
Wondering if you should invest in Mastercard stock? Here’s all you need to know.
Thirty-four out of 39 analysts on Yahoo Finance rate Mastercard stock a “buy” or “strong buy,” while 4 have recommended to hold. Overall the MA stock appears to be a good investment and worth holding right now.
However, Mastercard’s competitive advantage can work against itself too. According to the Nilson Report, Visa offers a similar range of payment solutions on an even larger scale, with an estimated 44% market share. By comparison, Mastercard’s market share is estimated at around 37%. As a result, Visa’s operating margins tend to be about ten percentage points higher.
Mastercard: A Stock Worth Adding To Your Watchlist
With promising future projects, Mastercard is definitely a stock worth considering to add to your portfolio.
Over the last decade, Mastercard has shown incredible resilience, transforming from a card company into a more diverse payment platform. This innovation has allowed Mastercard to build a virtually impenetrable moat around its business, and that should sustain growth for many years to come.
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