Payment processing vs flying to Mars: Have a look at MasterCard and Tesla share price performance. Both show the same period of observation – the last 7 years, since 2013. Now, Tesla made the rise from approximately $50 to almost $1000 during these years, while MasterCard rose from the same $50 to “only” $350. How good is each one?
Pick your cherry: “How good” comes down to what you need in your trade. If you have no problem admitting that the flip side of a 200% gain in 2 years is a risk to get halved in two days – meaning, you are an “honest” risk-taker – then Tesla may be good for you. Its vulnerability is its advantage – fundamental unpredictability. It’s fundamental because Tesla as an enterprise has not been fully successful in a business sense of the word, until now. It still functions largely on long-term liabilities, most of which come due in 4 years. And Tesla’s Model-3 purchase orders do not yet answer this question.
Even with the strategic horizon for electric cars as a global industry, Tesla still has the full potential to be wrecked at any time. Alternatively, it may rise to $2000, who knows. As Warren Buffet likes to say, if the knowledge of the past always led to wealth, Fortune-500 would consist of librarians.
Otherwise, if you prefer seeing your tree grow an extra apple every day, with no rush and no hustle, then MasterCard would be more interesting. Stability over risk, as usual. A clear advantage here – undeniable predictability. Recessions, wars, Coronavirus – whatever happens, the number of people will grow, the amount of money will grow, and the number of financial transactions will grow. Based on that, MasterCard is doomed to expand. The story becomes more interesting in view of the following facts.
A drop of venom: Coronavirus causes damage. This damage made MasterCard to reduce its projections for the Q1-2020 revenue. Now, it expects its revenue to grow by just 9-10% in the first quarter, while before it was expecting to have 11-12%, similar to Q1-2019. Overall, the company expects the yearly revenue growth to stay at the lower border of the forecast. That is an alerting obstacle indeed. However, there would be no fight without a greater reward.
A big cake: In the middle of February, an interesting announcement appeared in the media: MasterCard has finally obtained approval from the Chinese authorities to establish its bank card clearing in China. That means, $27trln-worth market opens its doors to the payment processing company. It’s too early to celebrate, however. First, AmEx is already there, having its formal approval since 2018. Second, local Chinese payment processing companies have long been servicing customers across the country, and they are already accustomed to paying by WeChat, etc. So yes, the path is clear, but no, it will not be an easy walk. MasterCard will have to struggle with no guarantee of success. But which is easier: fly to Mars or enter China? We will see.