Whats happening with Mastercard
Mastercard is apparently tied to the price of oil, or so you might think. The stock enjoyed its heyday run from $140 a share to $320 in just a matter of 10 months, but it seems now that the stock is a falling star. You could make the case that Mastercard is a bubble, sure its got fundamentals to back but the analysts following the stock are all too optimistic. Tightening credit in the US is something that will slow down its profit margins, the less people can spend the less Mastercard ultimately earns.
Mastercard might be enjoying some the perks its getting out of an economic slowdown. As people scramble to make ends meet, credit cards are a very easy way to tap quick credit. Paying the bills is made easy by the single swipe of a card, but as credit lines drop, the ability to borrow is limited and so are Mastercard’s future profits.
The bump in US earnings can only be attributed to a failure of people to make ends meet. Most people near financial crisis have already maxed out and wont add much more to Mastercards bottomline. I can’t foresee any more big profits coming from US consumers, Mastercard earns on purchases, not on interest charges or when a customer makes a payment. They only have a vested interest in the spending habits of its customers, if they aren’t spending, Mastercard isn’t making money.
The chart above shows the breakdown of what I’m expecting to play out for Mastercard. The stock fell through a critical trend and has much to do to revive itself. I’m expecting the downtrend to continue through the long term uptrend, there is just too much selling pressure on this stock.
