Why Moneygram International Inc Shares Sank

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Moneygram International Inc (NASDAQ: MGI  ) plunged 16% today after retail gorilla Wal-Mart Stores, (NYSE: WMT  ) announced a partnership with Euronet Worldwide, (NASDAQ: EEFT  ) to launch a competing wire-transfer service, Walmart-2-Walmart.

So what: Wal-Mart said that Walmart-2-Walmart will charge fees -- $4.50 for transfers up to $50 and $9.50 for up to $900 -- that are roughly 50% lower than similar offers in the market, raising serious concerns over the future profitability of several money-transfer companies. And while shares of industry leader Western Union (NYSE: WU  ) are also down today, the news is hitting MoneyGram particularly hard, as Wal-Mart currently accounts for about 30% of its total fee and investment revenue.

Now what: Walmart plans to make Walmart-2-Walmart available on April 24. "Walmart-2-Walmart brings new competition and transparent, everyday low prices to a market that has become complicated and costly for our customers," said Daniel Eckert, senior vice president of services for Walmart U.S. "We're doing what we do best -- launching a new service that challenges the status quo and drives down prices for our customers." So while it might be tempting to play Moneygram shares for a short-term rebound, Wal-Mart's entry into the space doesn't exactly lend itself to juicy long-term gains.  

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  • Report this Comment On April 18, 2014, at 2:48 AM, Interventizio wrote:

    Man if you look at this stock's multiyear chart: it never really recovered from the 2008 crash. It appears the company's (or the sector's) difficulties are no real news.

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