I wonder if I could just deflect you as ticker guide into a quick reason for the falls in MA and PYPL (and V) which has me stumped (along with the falls in medical device companies eg BCR BDX).
Clearly it must be interest rate-related (and the other ACA-related) but I do not understand what is going on.
Hope a quick one post to and fro on this is OK Saul!
I wonder if I could just deflect you as ticker guide into a quick reason for the falls in MA and PYPL (and V) which has me stumped (along with the falls in medical device companies eg BCR BDX).
Here is what Investor’s Business Daily had to say:
It’s unclear what it is hurting Visa, MasterCard and PayPal.
http://www.investors.com/news/visa-mastercard-paypal-stocks-…
If you are in a stock for the long run these moves are irrelevant. No need to worry about them. I took the opportunity to buy back my VISA calls.
Denny Schlesinger
Thank you for replying so quickly. No further ahead though, still in the dark which is not an ideal state for an investor. Not sure it is possible to say ‘these moves are irrelevant’ if the reason for them is unknown: the long run, in terms of interest rates or inflation can be quite a long! But thank you: will wind this up and go on looking for why rise in interest rates is bad for cards and PYPL as the market seems to have decided.
Could it be that higher interest rates will lead to higher interest rates on card balances and that some percentage of card holders are not paying off their monthly balances and so will be forced to reduce credit card spending??? Some logic in that, but I have no data to back it up.
KC
As these are pass through/toll collecting companies, inflation would only help as they get a piece of whatever is going through. The day to day movements are noise, and can be attributed entirely to rotations of “smart” money. For example, Shopify just decreased a bunch because of VC distributions, and FANG is hurting because institutions are rotating to banks and bio - that rotational capital has to come from somewhere.
What you should be on the lookout for is a fundamental change in the payments economy. If enough people being to adopt alternative measures, then you should be worried. Day to day noise isn’t important
Could it be that higher interest rates will lead to higher interest rates on card balances
VISA and MasterCard don’t have card balances, the banks do. AmEx and some others do have card balances. That makes a huge difference as VISA has no credit risk while AmEx does. I’m long V but will not invest in credit risk which is why I avoid banks.
Denny Schlesinger
Strelna,
Unfortunately, I have no further insight than what has already been offered.
I am not overly worried about MA or V, as both are still not too far off their all time highs.
Pure speculation, but while MA or V are not directly affected by interest rates or credit card delinquencies, higher interest rates might lead to less spending on credit cards which could adversely affect MA and V.
I have heard others mention that because tech stocks like the FANG group have been so successful, some investors are trimming their positions in the area to allocate more money to stocks that have been out of favor for quite a while. Since MA and V have been great investments too, you might be seeing the same effect.
As for PayPal, it has been a volatile stock for quite some time and I wish I understood its movements better. A quarter ago, the market reacted negatively towards its deal with Visa. Than this quarter, PayPal announced a near identical deal with MasterCard and the market loved it.
Now it is selling off again. I do not understand these movements but I must also confess I am not too concerned either.
I believe all three make for fine investments going forward, but I have been wrong many, many times before too.
Matt
Long MA, PYPL
MasterCard (MA), Nestle (NSRGY), PayPal (PYPL), and Verizon (VZ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx
Could it be that higher interest rates will lead to higher interest rates on card balances
But point was that cardholders numbers of purchases or value of purchases might decline as their card balances get higher and higher… or card maxed out. Thus lower income to V and MA from transaction fees.
KC
Many thanks for the replies, esp. CMFC. I feel sure you are right in the good point that higher rates = likely less spending (and more defaults).
We had better wind this up now as these are not really in the board’s remit.
Strelna, Jefferies analyst Jason Kupferberg thinks the latest dip in payments stocks like MasterCard, PayPal and Visa makes for a good buying opportunity:
Jefferies analyst Jason Kupferberg sees a buying opportunity in payment processors Visa (NYSE: V), MasterCard (NYSE: MA), PayPal (NASDAQ: PYPL), Global Payments (NYSE: GPN), and Vantiv (NYSE: VNTV) amid underperformance since the election of Donald Trump. Kupferberg views the 5-10% correction in core Payments names as not warranted fundamentally.
The analyst believes the downside is largely because of investor rotation into core Financials, which are expected to experience a significant rate and regulatory tailwind under a Trump Administration, rather than fundamental concerns regarding the payments names.
They generally envision Trump as a tailwind for payment stocks.
“If Trump’s general plans for de-regulating the financial services industry ends up including a repeal of the Durbin Amendment and a less-powerful CFPB, this should generally be a tailwind for the Payments industry, though impacts to PYPL/SQ/merchant acquirers may be less clear,” the analsyt commented.
The analyst goes on to note that interchange rates probably wouldn’t be significantly raised, even if the industry does see deregulation, as long as there is litigation ongoing.
Have to admit, I didn’t really consider the deregulation the industry might see under a Trump administration. It is a plausible explanation though for the recent price drop.
Read the entire piece at http://www.streetinsider.com/Analyst+Comments/Use+Trump-Rela…
Matt
Long MA, PYPL
MasterCard (MA), Nestle (NSRGY), PayPal (PYPL), and Verizon (VZ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx