Investors Bet That Visa, Mastercard Can Stand Up to Libra
June 18 2019 - 06:27PM
Dow Jones News
By Jessica Menton
Investors are betting that Facebook Inc.'s efforts to create a
blockchain-based payments system won't threaten credit-card
companies' winning streak.
Shares of Mastercard Inc. recovered most of their early losses
to finish less than 0.2% lower on Tuesday, while Visa Inc.'s stock
had a similar showing, slipping 0.2% after the social-networking
company announced plans to launch a cryptocurrency called Libra
next year.
Facebook's stock has surged by 44% this year. It has climbed
6.2% since The Wall Street Journal reported on Thursday that the
company signed up more than a dozen corporate partners -- including
Visa and Mastercard, along with PayPal Holdings Inc., Uber
Technologies Inc. and Spotify Technology SA -- that it said will
help manage Libra.
Stock moves among the two credit-card companies have outpaced
other lenders and broader technology stocks this year. Mastercard
has advanced by 37% in 2019, and Visa has jumped by 28%. The KBW
Nasdaq Bank Index of large commercial lenders has added 12% this
year, while the technology-heavy Nasdaq Composite has climbed
20%.
Some analysts said major credit-card companies haven't seen a
dent in their share prices because they could also gain from
Libra's success. Companies such as Visa and Mastercard will likely
be involved in influencing the design system, they said.
Also, analysts don't anticipate that cryptocurrencies will
materially threaten the existing payment infrastructure that is
going to drive growth at credit-card companies.
In April, Mastercard's first-quarter revenue rose as the company
got a boost from more credit-card transactions from online
shopping. Meanwhile, Visa delivered another quarter w ith strong
growth in card spending across its global network. "For this to get
to a level that would threaten Visa and Mastercard, this Facebook
cryptocurrency would have to take over the whole world," said Brett
Horn, senior equity analyst at Morningstar. "There's likely more
limited ambitions for it." If that's the case then it's helpful to
have connections with Mastercard and Visa because if people are
using this coin, then they may want to cash them out into existing
payment systems."
Another reason why credit-card stocks aren't moving too much on
the news is likely due to uncertainty surrounding the future of
Libra, said Lisa Ellis, partner and senior research analyst at
MoffettNathanson Research.
"The long-term impact of Facebook's payment system could be
mixed for Visa, Mastercard and PayPal," Ms. Ellis said.
Write to Jessica Menton at Jessica.Menton@wsj.com
(END) Dow Jones Newswires
June 18, 2019 18:12 ET (22:12 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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