Mastercard Stock Down 10% in 2021 – Time to Buy MA Stock?

Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.

The price of Mastercard stock has gone down 10% so far in 2021 as investors seem to be struggling to figure out how the future will look like for this payment solutions providers in an increasingly digital world.

Mastercard’s legacy business is currently being threatened by emerging technologies including digital payment solutions such as e-wallets while cryptocurrencies have also emerged as a potential rival to the firm’s centralized payment processing platform.

That said, the company is on track to recover from the hit it took during the pandemic with sales being expected to land at nearly $18.9 billion during the 2021 fiscal year compared to the $16.8 billion the company brought back in 2019.

Meanwhile, on 30 November, the company announced that it was approving an $8 billion share buyback program along with an 11% increase in its quarterly dividend, which will now stand at 49 cents per share.

For a company with a market capitalization of $314 billion, the program would take out of circulation around 2.5% of its total shares outstanding.

Overall, what can be expected from Mastercard stock as we are heading to a new year? Is this financial stock poised to keep underperforming the market or is its business still as strong as it always has been?

68% of all retail investor accounts lose money when trading CFDs with this provider.

Mastercard Stock – Technical Analysis

mastercard stock
Mastercard (MA) price chart – 1-day candles with multiple indicators – Source: TradingView

A sharp decline that started in mid-November has pushed the price of Mastercard stock to its lowest level since January this year but yesterday’s 4.5% uptick may have trapped short sellers.

A break below the $312.5 level may have been initially interpreted as a sign of weakness for Mastercard stock but the subsequent rebound that took place yesterday is pointing to a failed break.

Trading volumes for Mastercard have been steadily going up recently and this may indicate that the company is already deploying a portion of that $8 billion budget for repurchasing shares. Average trading volumes in November moved from 4.2 million once the month started shares to 6.4 million shares exchanged per day by the end of the month.

Deploying $8 billion in share repurchases would require the acquisition of approximately 25 million shares or more.

Momentum indicators for MA stock are pointing to a bearish outlook as the MACD is standing at its worst level since October 2020 while the Relative Strength Index (RSI) is sitting at 42 – also bearish.

Even if this bounce pushes the price of MA stock higher in the following days, the outlook for this financial stock would still be bearish unless it moves above its short-term moving averages. These are currently standing at $340.5 per share (20-day SMA) and $345.5 (50-day SMA).

Mastercard Stock – Fundamental Analysis

Analysts’ outlook for Mastercard stock is quite bullish as they are expecting that sales will grow at a rate of around 16% per year in 2022 and 2023 on the back of a fully recovered global economy.

Meanwhile, the firm’s forecasted earnings growth rate for the following two years is standing at 24%. If those optimistic targets are hit, Mastercard’s 32.6x forward P/E multiple could be considered fair.

Other than that, the impact of the share buyback program announced by the management may have already been priced by market participants.

Overall, the poor performance of Mastercard in 2021 may have been the result of overly stretched valuation multiples. Moving forward, the upside potential for the stock could be limited unless other developments lead to an upward revision of its earnings for the upcoming fiscal years.

Therefore, investors should expect that the price of MA stock may trade range-bound for a while. On the other hand, a decline below the $280 level could be an opportunity to buy a piece of this successful financial business at a more decent valuation.

Buy MA Stock at eToro with 0% Commission Now!

1
$50
Mobile AppYes
  • Buy over 800 stocks with 0% commission
  • Social trading network
  • Copy over 12 million traders and investors

About Alejandro Arrieche PRO INVESTOR

Alejandro is a freelance financial analyst with 7 years of experience in the industry. He writes technical content about economics, finance, investments, and real estate and have also assisted financial businesses in building their digital marketing strategy. His favorite topics are value investing, macro analysis, and technical analysis. Other publications Alejandro has written for include The Modest Wallet, and Capital.com.