Play It Safe With B-Rated Mastercard Stock
Certainly, there are pros and cons to holding Mastercard (NYSE:MA) stock. The company’s dividend payments are minuscule.
On the other hand, Mastercard is a recognized giant in the payments-processing space. There’s nothing wrong with investing in Mastercard as long as your expectations are realistic.
As we’ll discuss in a moment, Mastercard appears to be rejecting one controversial market sector while accepting another one.
Thus, prospective investors might be surprised to discover what Mastercard has been up to lately. So, let’s delve into the details now.
Mastercard Takes a Stand on Cannabis Sales
As soon as you think you know what Mastercard is all about, the company shatters assumptions with unexpected moves. For instance, you probably didn’t expect Mastercard to invest in the fintech business of South African telecommunications firm MTN Group Ltd.
It’s a bold wager on the rise of South Africa’s tech-savvy middle class. If fintech-sector opportunities emerge in South Africa over the coming years, Mastercard could reap the benefits.
Here’s something else you might not have expected. CoinDesk reports that Mastercard “has created a forum where crypto industry players can discuss and collaborate on central bank digital currencies” or CBDCs.
It’s difficult to know exactly how Mastercard would benefit from the potential proliferation of CBDCs. Mastercard evidently favors them and seems to want to be part of the national conversation surrounding CBDCs.
And, while Mastercard appears to favor CBDCs, the company reported prohibited debit-card purchases of legal cannabis on its payment network.
Will this turn out to be a good or bad move for Mastercard? Only time will tell, but the company might miss out on some opportunities to generate revenue in the cannabis industry.
A Busy Consumer Is Good for MA Stock
Clearly, there’s a lot to consider if you’re thinking about buying MA stock. From South African fintech to CBDCs and cannabis, the issues facing Mastercard and its shareholders are manifold and complex.
At the end of the day, however, there’s one overarching issue that’s central to Mastercard’s future prosperity. Specifically, an active U.S. consumer is positive for Mastercard. Without that, Mastercard would be in deep trouble.
Fortunately for Mastercard, consumer strength enabled the company to generate 44% profit margins, $6.3 billion in revenue and $2.8 billion of net income in the company’s most recently reported quarter.
Plus, there’s another piece of evidence that American consumers are staying busy in 2023.
In particular, Bloomberg reports that the second-quarter purchase volume on the Mastercard’s cards rose 13.5% year over year to $1.84 trillion.
Bloomberg attributed this card-volume increase to consumers flocking to “overseas travel destinations and other entertainment options.”
Americans will pay high prices for overseas airfare – and that’s positive for Mastercard, of course.
Mastercard Chief Financial Officer Sachin Mehra observed, “The same air ticket which used to cost $800 to go overseas in the past is now costing $1,500.” Yet, Mehra, added, “[T]he consumer is still spending on it.”
Expect Moderate Growth With MA Stock
Ultimately, Mastercard is a financial giant that’s willing to venture into some market sectors but not others. Therefore, it’s up to you to keep tabs on Mastercard’s latest ventures and determine whether you agree with them or not.
The most likely scenario is that MA stock will continue to gain value at a “steady Eddie” pace during the coming quarters. If you’re expecting to-the-moon share-price action, you’ll probably be disappointed.
Thus, we’re assigning a “B” grade to Mastercard shares and feel that it’s reasonable to invest in the company as long as you’re fine with moderate returns.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
