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Why Visa and Mastercard Stocks Dropped Today

Why Visa and Mastercard Stocks Dropped Today
Written by publishing team

What happened

here we go again.

News of a new type of coronavirus in South Africa sent stock markets reeling on Friday, with the spread of Standard & Poor’s 500 It was down 2% by 12:22 PM ET and the Dow was down 2.5%. Even financial giants like Visa (NYSE: V) And Master Card Credit Card (NYSE: MSc) They weren’t immune to pain either. Visa shares are currently down 2.7%, and Mastercard shares are down 4.7%.

Image source: Getty Images.

so what

Does this make sense, though? I mean, on the one hand, sure, coronavirus couldn’t choose a worse time to raise its ugly head again. South Africa literally That bombshell dropped in the markets just as American consumers were digging in on their Thanksgiving turkeys on Thursday, scrambling to get out and start shopping on Black Friday.

For a stock market driven by consumer spending, this was really bad timing.

What now

On the other hand, consider how investors are reacting today: They are selling shares of Visa and Mastercard, two companies that are in a better position to benefit if consumers once again return to their consoles to shop online with credit cards rather than going out to physical stores where they might be tempted – Horrors! Pay for their purchases with cash.

Even in the worst-case scenario, where consumers panic and stop using their cards to take care of services that require personal contact, remember: We’ve seen this movie before, and what happened last time is that consumers just bought merchandise instead of services. As a result, at the heart of the pandemic in 2020, Visa revenue was down just 5% compared to 2019 levels, and Mastercard revenue was down less than 10% (according to data from S&P Global Market Intelligence).

And Both Companies bounced back to do business more in 2021 than they did in 2019.

Long story short: the discovery of a new variant of the coronavirus is not the end of the world. Although I admit I find Visa stock more attractive at 36 times earnings valuation than Mastercard at 42 times earnings. Both companies are survivors and have business models that have proven effective in times of a pandemic.

I don’t see any urgent need to sell either of them today.

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.

About the author

publishing team