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Visa and Mastercard can overcome the milestone of $ 1 trillion

Visa and Mastercard can overcome the milestone of $ 1 trillion

6 February 2020

Soaring stock prices are propelling credit and debit card companies Visa Inc and Mastercard Inc up the market value charts, where they currently rank 7th and 11th among companies in the benchmark S&P 500 index. The stock prices of both Visa and Mastercard have gained roughly 50% in the past year.

While the stocks may not keep up that torrid pace, Visa and Mastercard would each be worth over $1 trillion by 2023 if their average annual gains of the past three years were to continue, surging past the likes of Facebook Inc and Berkshire Hathaway Inc, if they also maintain their recent pace.

Fueling their rise is a shift toward cashless financial transactions spurred by a rise in online shopping.

Visa had a market value of $449 billion and Mastercard’s stood at about $324 billion as of Thursday’s close. The $1 trillion club currently includes Apple Inc, Microsoft, and Google-parent Alphabet. 

Revenue for both Visa and Mastercard nearly doubled over their past five fiscal years, to nearly $23 billion for Visa, and about $17 billion for Mastercard, according to Refinitiv data.

Adjusted earnings per share more than doubled for both companies over that period.

About 43% of consumer purchases around the world excluding China are made using a digital form of payment, up from 28% in 2010, according to Lisa Ellis, senior analyst at MoffettNathanson. “Globally, we still have five to 10 years, at least, to go of penetration,” Ellis said.

Visa holds a 60% share of the credit and debit card market, followed by Mastercard with 30%, according to Ellis, with American Express far behind at 8.5%.

Despite their importance in finance, Visa and Mastercard are categorized as part of the S&P 500’s information technology sector. While Apple, Microsoft and chip companies such as Intel Corp often garner the lion’s share of attention, Visa and Mastercard have been key contributors to the rally in technology shares.

Source: Reuters

6 February 2020
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