Shares of Mastercard (NYSE:MA) traded 5.2% lower as of 1:25 p.m. EDT today for no obvious reasons other than broader macroeconomic factors and market sentiment.
Shares of the payments company dipped as the broader market got creamed today due to concerns over rising cases of the COVID delta variant across the country. At one point, the Dow Jones Industrial Average had tumbled roughly 900 points as the market panicked about the potential for slower economic growth and even potential lockdowns.
While you might see the Mastercard logo on many of your debit and credit cards, the company does not make credit card loans, but is instead a global payments company that facilitates transactions. Therefore, it makes money based on total spend volume, so slower economic growth and potential lockdowns are not good for the company.
In recent months, Mastercard stock has hit new highs as the economy has reopened and spending levels have surpassed those in 2019. The company reported recently that U.S. retail sales excluding automotive and gasoline increased 11% in June on a year-over-year basis and 10.4% compared to June 2019. E-commerce growth also continued to perform well, up 8.3% year over year.
This should bode well for when the company reports second-quarter earnings at the end of the month. The further adoption of digital payments should also be a good sign for the company.
While the increase in new COVID delta variant cases is quite concerning, it's still probably too early to know whether the recent uptick will slow economic growth or result in lockdowns. I still like the long-term prospects for Mastercard, given its digital capabilities and strong track record.