2 Top Financial Stocks To Watch For Strong Growth
Mastercard (NYSE: MA) and Visa (NYSE: V) have a lot in common. Between them, they dominate the payment processing market. The pandemic-led lockdowns and social distancing measures may have hurt spending, thus impacting the payment of these network giants. However, more are people avoiding using cash to make payment coupling with the easing of lockdowns. Therefore, the demand for online payment has been on the rise. You could also say that the pandemic has acted as a catalyst for payment networks. That’s thanks to a surge in e-commerce and contactless payment options.
Apart from China, I guess it’s safe to say that these two companies dominate the payment networks globally. They are unlike their two primary rivals American Express (NYSE: AXP) and Discover (NYSE: DFS) which also make money from issuing cards and lending. Visa and Mastercard present unique offerings since neither company is involved with money lending and issuing cards.
In recent years, both Mastercard and Visa have done an excellent job in increasing their acceptance and international reach. That’s not to mention improved technological capabilities. They each rake in billions in annual revenues and profits even during unprecedented times like this. As a result, it’s not surprising to know that they regularly pay dividends and engage in share buybacks. They remain a favorite of many investors including Berkshire Hathaway (NYSE: BRK.A). But if you were going to choose one, which of these titans is the better financial stock to add to your portfolio today?
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Mastercard (MA) Stock
Payment processor Mastercard has a strong presence globally with a coverage of more than 210 countries. The company’s stock was trading higher Thursday after the company posted earnings that beat Wall Street’s estimates in its fourth quarterly earnings.
This came amid growth in overall transactions partially offset the impact of a decline in cross-border volumes. The decline in cross-border volume is largely a result of the decline in travel spending during the pandemic. And that’s expected.
“During the quarter, we expanded key partnerships around the globe, and our acquisition of Finicity added to our Open Banking portfolio. We are encouraged by the availability of effective vaccines, and we remain focused on the innovations that will enrich the digital experience, strengthen security and trust, and enable choice through our multi-rail platform, all of which position us well for the future.” – Michael Miebach, CEO of Mastercard
From Cryptocurrency, Insights 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 speeds the transition to cashless payment solutions, the company expects to earn higher revenue from the increase in fees. With analysts expecting most Asian and European countries to go cashless by 2030, Mastercard seems to be in the right position. Also, Mastercard has also accelerated its Crypto Card Partner Program and has granted Wirex a principal membership license. This made it the first native crypto platform to issue Mastercard payment cards.
Meanwhile, Mastercard also has a broad range of market-leading services, from insights and analytics to cybersecurity tools. This allows the company to support its partners’ evolving needs 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 insights, to bolster its open banking platform. By incorporating this into Mastercard’s operations, the company expects to further enhance and grow its banking reach and capabilities.
It’s worth pointing out that MA stock gained 19% in 2020, a decent performance by any measure. It outperformed the S&P 500, which rose 16%. As the pandemic eases and the economy recovers in 2021, Mastercard could be looking at a strong 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 brought by the novel coronavirus.
On Thursday, Visa reported its first set of quarterly results for the fiscal year 2021. The period saw Visa report net revenue of $5.69 billion, which was 6% lower than the same period last year.
“Our performance in the fiscal first quarter reflected solid results and continued positive momentum in a challenging COVID-19 environment,” said Alfred F. Kelly, Jr., chairman and CEO of Visa in a statement. “We saw sustained strength of debit and e-commerce volumes as well as resilient domestic spending in most countries.“
Ecommerce & Digital Payment Set Visa For Major Growth
To capitalize on the accelerated shift to digital payments amid the pandemic, the company has been creating new business relationships with many fintech providers. One of those notable names is PayPal (NASDAQ: PYPL). In particular, the partnership will enable consumers and small-medium enterprises to move their money faster through PayPal and Visa Direct Capabilities.
Also, the rapid shift to e-commerce also brings significant value to Visa. This is because its share of digital commerce is at least three times greater than the physical point of sale. Throughout the pandemic, the company could continue to leverage its expertise, innovative digital solutions, and analytics to support clients in understanding consumer behavior and expectations. This would undoubtedly allow businesses to unlock new opportunities, a win-win for both Visa and its clients.
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Bottom Line
Both Mastercard and Visa have strong business models that stand to benefit in the increasingly digitized world. That said, both of these stocks appear to be excellent options for investors who want to profit from the war on cash. They are on the path to recovery as economies are reopening even though travel-related and other businesses continue to be a major drag on cross-border volumes.
Without a doubt, the increasing number of cards and digital payments made globally will continue to benefit Mastercard and Visa. In addition, they are also moving into analytics and other adjacent opportunities. Mastercard’s higher growth rate and smaller size could suggest more upside ahead. Yet, Visa’s lower valuation and better margins could attract its fair share of investors as well. The bottom line is, whichever you choose, you could be looking at a stock to hold for years if not decades.
