2 main financial stocks to watch for strong growth
Mastercard (NYSE: MA) and Visa (NYSE: V) have a lot in common. Among themselves, they dominate the payment processing market. Lockdowns caused by the pandemic and social distancing measures may have hurt spending, affecting payment for these network giants. However, more and more people are avoiding using cash to make payments coupled with easing blockages. As a result, the demand for online payment has increased. You could also say that the pandemic acted as a catalyst for payment networks. This is thanks to the rise of e-commerce and contactless payment options.
Outside of China, I guess it’s safe to say that these two companies dominate payment networks globally. They are different from their two main rivals American Express (NYSE: AXP) and Discover (NYSE: DFS) which also make money by issuing cards and lending. Visa and Mastercard present unique offers as neither company is involved in lending money and issuing cards.
In recent years, Mastercard and Visa have done a great job in increasing their acceptance and international reach. Not to mention the improvement in technological capabilities. They are each raking in billions in annual income and profits, even during unprecedented times like this. So it’s no surprise that they regularly pay dividends and buy back shares. They remain the favorites of many investors, including Berkshire Hathaway (NYSE: BRK.A). But if you had to pick one, which of these titans is the best financial stock to add to your portfolio today?
Mastercard (MA) shares
The Mastercard payment processor has a strong global presence with coverage of over 210 countries. The company’s stock was trading higher on Thursday after the company reported profits above Wall Street estimates in its fourth quarterly earnings.
This happened as growth in global transactions partially offset the impact of lower cross-border volumes. The drop in cross-border volume is largely the result of lower travel spending during the pandemic. And it is expected.
“During the quarter, we developed key partnerships around the world and our acquisition of Finicity added to our Open Banking portfolio. We are encouraged by the availability of effective vaccines and remain focused on innovations that will enrich the digital experience, enhance safety and confidence, and enable choice through our multirail platform, which positions us well for the future. .“- Michael Miebach, CEO of Mastercard
From cryptocurrency, information and analytics to cybersecurity
The company has invested heavily in cashless payments. It has almost doubled its fees on card payments over the past two years. As the COVID-19 pandemic accelerates the transition to cashless payment solutions, the company expects to generate higher revenues from increased fees. With analysts expecting most Asian and European countries to be cashless by 2030, Mastercard appears to be in the right position. In addition, Mastercard has also ramped up its crypto card partner program and granted Wirex a master membership license. This made it the first native crypto platform to issue Mastercard payment cards.
At the same time, Mastercard also offers a wide range of market-leading services, ranging from information and analysis to cybersecurity tools. This enables the company to support the changing needs of its partners in a rapidly changing world. In June, Mastercard announced an agreement to acquire Finicity, a leading provider of real-time access to financial data and information, to strengthen its open banking platform. By incorporating this into Mastercard’s operations, the company hopes to improve and further develop its reach and banking capabilities.
It should be noted that MA stock gained 19% in 2020, a decent performance in all respects. It outperformed the S&P 500, which rose 16%. As the pandemic eases and the economy recovers in 2021, Mastercard could look to a solid year ahead.
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Visa (V) Stock
Visa shares a duopoly with Mastercard in the payment processing market. Similar to Mastercard, Visa could not escape the impact of the novel coronavirus.
On Thursday, Visa released its first round of quarterly results for fiscal 2021. During that period, Visa reported net sales of $ 5.69 billion, down 6% from the same period last year.
“Our performance in the first fiscal quarter reflects strong results and continued positive momentum in a challenging COVID-19 environment,“Alfred F. Kelly, Jr., president and CEO of Visa said in a statement.”We saw continued strength in debit and e-commerce volumes as well as resilient domestic spending in most countries.“
Ecommerce and digital payment define Visa for major growth
To capitalize on the accelerated shift to digital payments amid the pandemic, the company has established new business relationships with numerous fintech vendors. One of those notable names is PayPal (NASDAQ: PYPL). In particular, the partnership will enable consumers and small and medium-sized businesses to transfer their money faster using PayPal and Visa Direct capabilities.
In addition, the rapid shift to e-commerce also brings significant value to Visa. Indeed, its share in digital commerce is at least three times that of the physical point of sale. Throughout the pandemic, the company could continue to leverage its expertise, innovative digital solutions and analytics to help customers understand consumer behavior and expectations. This would undoubtedly allow businesses to unlock new, win-win opportunities for Visa and its customers.
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Mastercard and Visa both have strong business models that should benefit in an increasingly digital world. That said, both of these stocks appear to be great options for investors looking to profit from the war on liquidity. They are on the road to recovery as economies reopen, although travel and other activities continue to weigh heavily on cross-border volumes.
Without a doubt, the growing number of cards and digital payments made around the world will continue to benefit Mastercard and Visa. In addition, they also look to analysis and other adjacent opportunities. The higher growth rate and smaller size of Mastercard could suggest more potential ahead. Yet Visa’s lower valuation and better margins could also attract its fair share of investors. Ultimately, whatever you choose, you might want to consider a stock to hold for years or even decades.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.