Daily Stock Pick: September 7th, 2021

Stocks were little changed to kick off the holiday-shortened week.  A rash of downgrades came last week and over the weekend amid rising fears around the impact that the resurgence of the pandemic will have on the economic recovery.  Investors seemed cautious to start the day.  

Some of the pandemic-era changes we think are here to stay are contactless payment, online shopping, and food delivery services.  Our stock pick for today features one of the beneficiaries of the trend that is looking to go full steam in the years to come as digital and contactless solutions gain popularity around the globe.  

Mastercard Incorporated (MA) caught up nicely from the pandemic forced closures.  In fact, MA’s share price blew past its pre-pandemic peak earlier this year, but it has since fallen and is now less than a percent from where it was before Covid reared its ugly head.   

So far, for the year, MA is down 3.2% and is performing better than the Zacks Financial Transaction Services industry, which is down 12.47% for the same period.  Credit is due in part to the company’s geographic expansion initiatives along with a few key acquisitions made earlier this year.

Recent data shows that consumers are spending more on their debit cards and less on credit cards, which is good for Mastercard because they make more per transaction from debit card purchases than those made on credit cards.  They also make more on cross-border transactions that come mostly from international travel, which ground to a halt due to the pandemic.  

We believe that greater global adoption of digital and contactless solutions will provide an opportunity for Mastercard to accelerate its shift to the digital mode. At the same time, a strong capital position will allow the company to continue its pursuit of strategic acquisitions and global expansion. 

We aren’t the only ones who believe MA has plenty of gas in the tank as contactless payment takes over.   Mastercard is one of the stocks named by Warren Buffet to buy and hold for the long term.  

On August 17, investment advisory JPMorgan reiterated an Overweight rating on Mastercard stock and raised the price target to $430 from $427, noting that the firm was slated for a return to pre-pandemic growth in the second half of 2021.

The current consensus among 38 polled investment analysts is to buy stock in Mastercard Inc.  There are 32 Buy ratings for the stock, 6 Hold ratings, and no Sell ratings.  A twelve-month median price target of $447.50 represents a 31.5% increase from its current price.

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