Headquartered in Purchase, New York, Mastercard is a technology company that provides financial transaction processing services. The company was founded in 1966. and its payments solutions help connect consumers, merchants, financial institutions, businesses and governments.
Mastercard serves customers around the world, with its services supporting the development and operation of debit/credit cards, ATMs, electronic cash, and travellers’ checks. Its wide range of payment solutions is offered through its three known brands: Mastercard, Maestro and Cirrus.
Mastercard was founded in response to BankAmericard (later known as Visa), which had debuted in 1958.
Several regional bank card associations joined together, allowing unit banks to offer card solutions to their customers by outsourcing their management to the association. The association was known as Interbank.
Interbank quickly rebranded to Master Charge as they expanded internationally in early 1969, and later to Mastercard.
During the 1970s, Mastercard performed numerous innovations in the payments space, including making the magnetic strip a standard on all its cards.
But that notwithstanding, it failed to match the reach and penetration of its main competitor, Visa.
In the 21st century, the company has always sought to reach the low-end consumer market as its competitors focused on the higher end market. To aid its growth and expansion, Mastercard has, over the years, made major strategic acquisitions. Notable deals include the 2019 buyout of Transactis for $57 million and the 2020 acquisition of Finicity for $825 million.
Mastercard went public in 2006, listing on the NYSE where it trades under the ticker symbol MA. The stock falls in the Financial Services sector, under the Credit Services industry.
MA Stock History
MA stock went public with an IPO price of $39. Since then, the company has had one stock split; a 10-for-1 implemented in January 2014. As such, the split-adjusted IPO price for MA is around $4. The company implemented the stock split when its share price traded at over $800, with the resulting split bringing the price down to below $100.
MA has posted an impressive stock market performance in the relatively few years it has traded publicly. Its price chart shows an asset that has sustained an upward trajectory from the word go.
The stock gradually climbed to highs of circa $30 by May 2008, but the recessionary effects at the time only managed to pressure it to lows of below $15 before the end of that year.
The recovery that ensued was more than impressive. The stock eventually breached the $100 barrier in August 2015 and extended the rally that topped at circa $340 by February 2020.
The coronavirus-inspired economic downturn triggered a pullback to just above $200, but MA recovered all the losses and went ahead to print an all-time high at circa $367 in August 2020.
Mastercard has been a consistent dividend payer. Still, its payout ratios are considered minimal, but sustainable; and the strong fundamentals of the company mean that investors can gain from returns of higher stock valuation.
How to Trade MA Stock
Mastercard is one of the most lucrative stocks on Wall Street. Nonetheless, here are some of the factors to consider when trading MA stock:
- Legislative and Taxation Issues
The financial services industry is subject to a rapidly changing and dynamic legal environment as governments seek to regulate the space, particularly in areas, such as data privacy and interchange fees. As a payments solutions provider, Mastercard must also stay on top of data localization demands in various jurisdictions as well as comply with anti-money laundering, anti-corruption and anti-terrorism protocols. These legal and taxation policies have a direct impact on the costs incurred by Mastercard and can limit their overall revenues and margins.
- Competition, New Markets and New Product Rollouts
There has been an upsurge in demand for electronic and digital payment solutions globally. With Mastercard deep in this space, success will be determined by the release and adoption of new products, such as practical B2B payments, as well as penetration into lucrative markets, such as China, where the company already has some footprints. Still, the company faces tough competition from established giants such as Visa, American Express, Discover and UnionPay; as well as mobile wallet solutions such as PayPal, Skrill and MPesa.
- Economic Conditions and Monetary Policy
The Mastercard business thrives when consumer and business spending is growing. These are underlying indicators of a growing economy. Monetary policies, such as cutting interest rates, also grow the demand for Mastercard services and consequently, its stock price. On the other hand, the MA stock suffers headwinds during weak economic conditions and unfavourable monetary conditions, such as interest rates hikes.
- Periodic Earnings Reports
Mastercard fiscal year runs from January to December. Its earnings release date is an important event for investors as the MA stock is known to post significant price changes during those times. The company releases quarterly, semi-annual and annual reports, with investors watching out for important metrics such as revenues, margins and new users. Impressive numbers that surpass expectations usually inspire an upward rally, whereas weak numbers that do not meet expectations provide headwinds for the MA stock.
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** Disclaimer – While due research has been undertaken to compile the above content, it remains an informational and educational piece only. None of the content provided constitutes any form of investment advice.