Please ensure Javascript is enabled for purposes of website accessibility

Why Mastercard Stock Just Dropped 6%

By Rich Smith – Feb 25, 2020 at 2:40PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors are shocked as a legendary CEO steps down.

What happened

Mastercard (MA 3.91%) stock is down again Tuesday, its shares off 6% as of 2 p.m. EST -- and it's not just because of the coronavirus scare this time.

This morning, Mastercard announced that its current CEO, Ajay Banga, will step down from his post at the end of this year, to be replaced by a relative unknown from within the company -- Chief Product Officer Michael Miebach. Unnerved already by the spread of coronavirus across the globe, investors aren't responding to the news well.

Man with surprised expression holds credit card and looks at phone

Image source: Getty Images.

So what

So why are they worried? Don't management changes happen all the time?

Well yes, it sometimes seems that way -- but this time may be different. Over the past nearly 10 years, Banga has overseen a titanic surge in Mastercard's stock price that took shares of this blue chip stock from $21 to $304. That's about a 1,350% growth in stock price -- better than 100% gains per year he's been in charge.

Over the same period, from 2010 to 2019, Mastercard's revenue has tripled, according to S&P Global Market Intelligence, and its profits have more than quadrupled. Per-share profits are up nearly five times.

Simply put, investors have profited mightily from Banga's tenure. It's only logical that they'd be a bit nervous to see him go.

Now what

On Jan. 1, 2021, Banga will step down from his post as chief executive officer and become the company's executive chairman of the board, a whole step removed from running the company directly. And into his shoes will step Miebach.  

Banga praised his replacement highly, saying Miebach "has a proven track record of building products and running businesses globally" and "has been a key architect of our multi-rail strategy." But no matter how good he is, he's going to be hard pressed to prove he's as good as the CEO he's replacing.

Until he does, expect Mastercard investors to remain skeptical.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Mastercard. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Mastercard Incorporated Stock Quote
Mastercard Incorporated
$301.85 (3.91%) $11.37

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.