Mastercard and Visa Are Safe Havens in Turbulent Times

Published 31/03/2023, 12:22
MA
-
V
-
  • In uncertain times, investors looking for safe havens should consider investing in the digital payments industry.
  • Visa and Mastercard dominate globally and offer great investment options, especially during high inflation.
  • Both companies are financially sound, with decent growth prospects.
  • As the global economy faces a possible recession, many investors seek safe havens to weather the difficult times ahead. One option that stands out is the digital payment market, which offers high stability, geographic diversification, and considerable growth potential.

    When it comes to digital payments, Mastercard (NYSE:MA) and Visa (NYSE:V) are the names that immediately come to mind. These global giants dominate the market, with a strong foothold in most global markets, except for mainland China, where UnionPay prevails. With digital payments expected to continue growing through 2022-2026, the two industry leaders are expected to maintain their solid footing in the market.

    Digital Payment Market Forecasts

    Let's analyze the strengths and weaknesses of the entire digital payment sector.

    Rising Inflation is a Tailwind

    Digital payment providers can benefit from rising inflation as they act as intermediaries and do not take on investment or credit risks. This is particularly significant in the recent economic climate, where the banking crisis scare shook the financial markets. It's important to keep in mind that digital payment providers, such as Mastercard and Visa, play a crucial role in facilitating transactions and are not directly impacted by inflation or other market risks.

    Both Visa and Mastercard stand to benefit from persistently high inflation, as it leads to an increase in commission profits due to higher prices. Although their profit share within the customer-merchant chain is relatively low, they make up for it through high transaction volumes. In fact, their transaction volume in 2022 alone amounted to a staggering $11.6 trillion.

    Over the past few years, non-cash payment systems have gained ground in Europe, particularly in Scandinavian countries. This trend is being driven by the fight against tax fraud and the gray market. The momentum for these systems continues to grow, which is a positive development for both companies.

    The digital payments industry could be adversely impacted by government regulations that impose limits on the maximum fees that can be charged. Currently, the UK, Australia, and the European Union have taken limited steps towards implementing such regulations.

    Visa’s Stable Growth in Profits and Revenues

    Visa appears to be in a strong position from a fundamental standpoint, as evidenced by its consistent net profit and revenue growth.

    Visa Revenue

    Source: InvestingPro

    Visa Net Income

    Source: InvestingPro

    It is also worth paying attention to its score of 9 points on the Piotroski indicator.

    Visa: Piotroski Indicator Score

    Source: InvestingPro

    Therefore, it is not surprising that the company scored 4 points out of 5 for financial health. The company is scheduled to release its Q1 2023 results on April 26th. According to forecasts, the earnings per share are expected to be $1.98, and revenues are expected to be $7.76 billion.

    Mastercard Isn't Losing Momentum Either

    Upon analyzing Mastercard's results, it appears that there is no evidence of any slowdown at present. In 2022, payment values increased by 5.9%, which resulted in an impressive 18% rise in sales. Furthermore, the transaction volumes of tourists using cards outside their home country increased by 30% YoY, which is noteworthy. With the predicted global increase in digital payment volumes, there is a high probability that Mastercard will maintain its strong performance, similar to Visa, which has consistently shown growth in revenues and net profits in the current year.

    Looking at the technical analysis, the long-term trend of the company's stock price has been positive, with a buying impulse observed since September of last year. However, since the beginning of this year, the stock prices have been moving within a downward price channel. A breakout above this channel would signal a clear shift in sentiment.

    Mastercard Stock Weekly and Daily Price Chart

    In the event of a breakout, the next target is $400.

    InvestingPro

    Disclosure: The author does not own any of the securities mentioned.

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2024 - Fusion Media Limited. All Rights Reserved.