Can Mastercard Stock Recover Its Lost Value Post The Coronavirus Crisis?

by Trefis Team
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Mastercard (NYSE: MA) stock could bounce back strongly and potentially outperform the S&P 500 index as the crisis winds down, similar to the post 2008 crisis where it rose nearly 62% between March 2009 and January 2010, as compared to the 48% jump in the S&P index. We have detailed the ‘2007-08 vs. 2020 Crisis Comparison: How Did MasterCard Stock Fare Compared with S&P 500?’ in an interactive dashboard, parts of which are summarized below.

The stock market witnessed a major sell-off on 9th March and (through March 12) has continued its downward spiral since then. There were two distinct trends driving the sell-off. Firstly, the increasing number of Coronavirus cases in the U.S and other countries outside China is causing mounting concerns of a global economic slowdown. Secondly, a sharp decline in crude oil prices after Saudi Arabia increased production in a price war with Russia. The effect was also felt on Mastercard stock which fell 16% over the last 4 days (through March 12) and is down by a total of 24% since early February, considering the impact that the outbreak and a broader economic slowdown could have on consumer spending and the global payments processing industry. As the company derives around 22% of its revenues from International Fees; travel bans and widespread panic due to Coronavirus outbreak could severely impact this revenue stream. Further, lower consumer spending would result in lower transaction volume leading to lower transaction processing fees, which contributes around 34% of the company’s revenues.

MasterCard Performance During 2020 Coronavirus/Oil Price War Crisis

  • Mastercard stock declined by about 16% since Monday, March 9th (through March 12) and the stock is down by about 24% since February 1, after the WHO declared a global health emergency.
  • On the other hand, the S&P 500 declined by 17% over the last 4 days (through March 12) and has fallen by 26% since February 1, after the global health emergency was declared by the WHO.
  • In comparison, American Express, which is a payment services giant, saw its stock fall by about 30% since early February and by about 23% since Monday (through March 12). View our analysis for American Express here: 2007-08 vs. 2020 Crisis Comparison: How Did American Express Stock Fare Compared with S&P 500?

 

MasterCard Stock Performance Over 2007-08 Financial Crisis

  • Mastercard stock was around $15 in October 2007, which was the pre-crisis peak for S&P 500.
  • Thereafter, it grew to levels of around $23 in September 2008 before declining to levels of around $15 in March 2009 (as the markets bottomed out) and recovered to levels of about $24 in early 2010.
  • Through the crisis, MA’s stock declined by as much as 35% from its September 2008 peak. This marked a slightly lower decline than the S&P which fell by as much as 38% over the same period.
  • However, the stock recovered strongly, rising by 62% between March 2009 and January 2010. In comparison, the S&P rose by about 48% over the same period.

Conclusion

Although Mastercard’s stock has declined due to the Coronavirus/Oil Price War crisis, going by trends seen during the 2008 economic slowdown, Mastercard stock will likely recover its lost value and potentially outperform as the crisis winds down.

 

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