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Why Mastercard's Stock Declined 14.6% in October

By Royston Yang – Nov 3, 2020 at 8:38AM

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The payments giant continues to see a slow recovery in spending across the world.

What happened

Shares of Mastercard (MA 1.47%) declined 14.6% in October, according to data provided by S&P Global Market Intelligence.

The financial technology and digital payments company's stock has been under pressure since the COVID-19 pandemic broke out, and is still down around 5% year to date.

Person tapping credit card on hand-held terminal while buying a cup of coffee

Image source: Getty Images.

So what

Mastercard released its third-quarter 2020 earnings in late October, and it wasn't a pretty picture. Net revenue declined by 14% year over year to $3.8 billion, while net income fell by 28% year over year to $1.5 billion. This fall in revenue is mainly attributable to the cross-border transaction volume decline of 36% as borders have remained shut due to the pandemic. Investors are disappointed that both revenue and profit continue to fall amid one of the worst economic crises in a decade.

On the bright side, the company has provided a business update on operating conditions through Oct. 21. For the week ending Oct. 21, overall transaction volume has increased by 5% year over year, led by the U.S., which saw an 8% year-over-year increase. Although cross-border volumes remain at 70% of last year's levels, it was still an improvement over July and August, where volumes hit 61% and 65% of the prior year's levels, respectively.

Now what

Mastercard is not standing idly by to wait for transaction volumes to recover. The company has been busy launching new services and collaborating with reputable partners to grow its business beyond this pandemic. Mastercard recently expanded its Digital First Card Program in the U.S. by partnering with a host of payment processors to offer comprehensive payment solutions for customers. This initiative allows the cardholder to gain quick access to their card details and also provides access to their transaction history, among other benefits.

With the pandemic accelerating the need to go digital, Mastercard has launched a diagnostic tool, known as the Small Business Digital Readiness Diagnostic, to help around 50 million small businesses go digital more easily. This initiative also helps to funnel higher transaction volumes and value through the company's network should it successfully help these smaller businesses digitalize.

Royston Yang owns shares of Mastercard. The Motley Fool owns shares of and recommends Mastercard. The Motley Fool has a disclosure policy.

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