MASTERCARD: A BUY ON WEAKNESS?

Mastercard (MA), major credit card transaction processor dropped to a low of $139 today before recovering to $150 on excellent earnings.  No only did they beat the street but suggest that the consumer is still doing pretty dandy.  It has a major advantage over issuers such as Discover and American Express (AXP) because they are processors not holders of the debt which turn out to be the banks that cobranded the Mastercard brand.  Another big advantage is that Mastercard has 50% of it’s revenue coming from outside the US so they benefit from global growth and the upside on the currency play.

There are possible problems such as the possibility of a global slow down but that goes with most companies.  The possibility of slower domestic growth is another one however the global portion should more than make up for it.   Jim Cramer on CNBC says the sell off was “overdone” but the stock closed from it’s lows of the day.

From the chart, you can see that Mastercard technically has support at about $140 which it hit today and bounced right back up.  If it breaks that the next support is at $118 or so but it did bounce today and it may see the low $140s or high $130s before bouncing back up.  It has a 16% short ratio which may build with the stock moving down and any catalyst may move it.  The company has about $2 billion in cash at a $20 billion valuation – with a forward PE of 25 and a growth rate of 15%-20%, Mastercard still seems like a buy with the global transition from cash to credit payments.