Many investors prefer to wait for market-wide dips before jumping into new positions, and rightly so. Stocks are constantly falling, but good stocks always recover from setbacks on their way to higher heights. It is just a matter of time.
If you are waiting for another withdrawal to go to the payment facilitator Master Card Credit Card (NYSE: MSc)However, don’t. That stock’s price has already fallen about 17% from its peak in late July, but not for a particularly logical reason. It’s a bargain now, and a market crash may not lower its current price enough to justify waiting any longer.
Down, but not out
Don’t read too much into the letter. Market-wide weakness could send Mastercard shares down a little, or even a lot. Everything is possible.
Despite this, a mass meltdown may not be in the cards for very long. Stopping your purchase may prevent you from entering into a rebound from Mastercard which is due to come true sooner rather than later. It certainly has the right growth prospects to support such a recovery.
MasterCard facilitates nearly a third of the world’s credit card payments, according to research firm MoffettNathanson. This is only half of the competition Visa‘s (NYSE: V) than the traditional card payment market, but a third of a market worth hundreds of billions of dollars annually still presents a lot of opportunity. The company is also exposed to the arena of debit cards, ATMs, merchant analytics, and even cryptocurrency.
All this diversity in demand and revenue didn’t mean much a week ago. The company topped its third-quarter estimates of $4.95 billion in revenue and $2.19 in earnings per share (EPS) by reporting $5 billion in sales and $2.37 in EPS. But stock prices are still down 6%. The stock price fell another 3% in the meantime, as investors saw tepid earnings guidance not from Mastercard, but from Visa. Finally, MasterCard stock is now 17% below its July high, slipping just below its pre-pandemic peak just this week.
It just doesn’t make sense.
Certainly, the future is not at all clear for credit card companies. This year’s spending rebound is strong as COVID-19 infections subside and consumers return to normal. However, it may be difficult to maintain the pace of spending growth this year. The next era of payment processing is also one that is notably characterized by smaller alternatives such as PayPal (NASDAQ: PYPL) And Square (NYSE: SQ).
However, it can be argued that the stock sale achieved over the past several weeks ignores the net potential of all the growth initiatives that MasterCard is working on.
Adapt as needed
Case in point: the aforementioned cryptocurrency solution for one person. In February, the company announced that selected cryptocurrencies would become viable payment and settlement options within its network before the end of the year. It’s moving ahead on the crypto front meanwhile, acquiring CipherTrace in September, unveiling a partnership with breaded (NYSE: BKKT) in October. CipherTrace introduces new in-house crypto security features, while Bakkt helps merchants offer crypto payment options to their customers.
This is just one example of MasterCard adapting to take advantage of the constant changes in the market. In October, the company expanded its B2B payment platform which provides more capital to companies looking to simplify the payment aspect of their supply chain. Earlier this year, the credit card company and Verizon They announced that they are collaborating to bring 5G solutions to the global payments industry.
These are the kinds of developments that most investors would reject, and understandably so. None of them are game-changing per se. In all, though, all of these small initiatives paved the way for corporate sales and earnings growth into 2023. Analysts certainly think so anyway.
True, investors don’t seem to see that now. These long-term growth expectations were and still are obscured by a host of hype, from and around the company. Adding to this distraction is the continued development of unconventional payment options, and more pressing addresses from the political and economic spheres.
However, this noise does not actually change the financial trajectory of MasterCard.
Waiting for a broad market crash may help bring down the entry price to Mastercard…a bit. But this is a choice where waiting for a comprehensive correction that may or may not actually materialize leads to more risk of losing potential gains. The shares are already priced more than 30% below the analyst’s agreed-upon target price of about $432 per share. Any pullback – regardless of market condition – is an entry opportunity for investors who are ready to step in now.
The key to this trade is simply the desire to hold onto it for several years, not just a few months.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.