Earlier this month, the Mastercard Foundation – a ten percent owner in Mastercard – sold around $50 million of the company’s stock, offloading 109,000 shares at roughly $458 per share.
This in turn has reduced the Mastercard Foundation’s ownership down to 97,215,308 shares – this in a month where Mastercard is struggling to reach its potential, starting off just shy of its all-time high, and ending the month by sinking 0.07% to $462.
For investors – or potential investors – in Mastercard, this move has created a bit of a dilemma. On the one hand, market analysts often scrutinize these kinds of sell-offs, stating that they signal an obvious shift in the company’s valuation and the major shareholder’s projection on future performance.
With Mastercard continually underperforming the market, this viewpoint has merit, and it could jumpstart a mass decline in investor confidence – similarly shifting the market as a whole, given Mastercard’s heavy presence. But we’re here to tell you that this sale is not necessarily a bad sign. In fact, it could be the opposite.
Mastercard as a Major Player
It’s hard to argue that Mastercard is not a major player in the stock market. In the world of credit and debit cards, Visa and Mastercard continue to reign supreme, with various industries promoting them as their top payment options. The online casino industry, in particular, has been knuckling down on its payment safety and security over the last decade.
With Mastercard one of the best for offering advanced, proficient safety benefits as part of its service, in 2024, players are picking casinos based primarily on the platforms accepting Mastercard. This trust, confidence, and loyalty – in a world of multiple payment options – has subsequently led to 1.1 billion Mastercard credit cards in global circulation and, although it hasn’t made it a surefire bet in the stock market, it’s certainly made it a solid bet.
Just look at 2023. From an economic standpoint, inflation and higher interest rates created a volatile and uncertain environment in the stock market. Despite this, Mastercard reported a revenue growth of 13%, with a 12% increase in payment volume. The CEO, Michael Miebach, credited healthy consumer spending, and this is hard to discredit, seeing as Mastercard’s net profit margin has averaged around 45% in the last five years – a truly exceptional figure given the changes in the global economy and the negative effect on the stock market itself.
The Potential for Mastercard
But let’s go back to the $50 million sale of Mastercard stock. Surely this is an indication of a changing public perception? The world is very different compared to ten years ago, of course. There are now numerous ways to pay for things, with the cryptocurrency market cap, specifically, now worth nearly $2.5 trillion. With consumers able to pay with anything from Bitcoin to Solana, how much room is there for a traditional, fiat currency option like Mastercard?
Well, we would argue there’s a lot – at least at the moment, when cryptocurrency as a concept is still not wholly integrated into everyday life. Indeed, when it comes to the selling of nearly $50 million in Mastercard stock, the Mastercard Foundation’s movements may not be negative, or at least, not negative where the market is concerned. Rather, it could be an indicator of their own current needs – perhaps a portfolio rebalancing or a solution to certain liquidity issues.
It’s important, in this case, to get a more broader context of Mastercard and where it might go in the future. Right now, the company still boasts a market cap of nearly $431 billion, with a P/E ratio of 38.77 and a P/B ratio of 61.91. This is highly indicative of a company with significant presence in the market, trading at a high earnings multiple, and valued at a premium.
There are some analysts, also, who project that Mastercard stock is 20% undervalued, meaning it could soar exponentially when the financial climate straightens and the stock market as a whole begins to pick up. Over the last few years, Mastercard stock has only shown negative traits in competition with itself, rather than the market – and even then, the negative traits are hardly negative.
With its consistent, steady growth, and its profitability, it could make a nifty buy at this stage in time, with investors likely to be rewarded depending on what trading strategy they utilize. But if you’re an investing beginner, as always, it’s important you do your own research and make a decision that suits you and your portfolio.
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