Investors Bet That Visa, Mastercard Can Stand Up to Libra

By Jessica Menton 

Investors are betting that Facebook Inc.'s efforts to create a blockchain-based payments system won't threaten credit-card companies' winning streak.

Shares of Mastercard Inc. recovered most of their early losses to finish less than 0.2% lower on Tuesday, while Visa Inc.'s stock had a similar showing, slipping 0.2% after the social-networking company announced plans to launch a cryptocurrency called Libra next year.

Facebook's stock has surged by 44% this year. It has climbed 6.2% since The Wall Street Journal reported on Thursday that the company signed up more than a dozen corporate partners -- including Visa and Mastercard, along with PayPal Holdings Inc., Uber Technologies Inc. and Spotify Technology SA -- that it said will help manage Libra.

Stock moves among the two credit-card companies have outpaced other lenders and broader technology stocks this year. Mastercard has advanced by 37% in 2019, and Visa has jumped by 28%. The KBW Nasdaq Bank Index of large commercial lenders has added 12% this year, while the technology-heavy Nasdaq Composite has climbed 20%.

Some analysts said major credit-card companies haven't seen a dent in their share prices because they could also gain from Libra's success. Companies such as Visa and Mastercard will likely be involved in influencing the design system, they said.

Also, analysts don't anticipate that cryptocurrencies will materially threaten the existing payment infrastructure that is going to drive growth at credit-card companies.

In April, Mastercard's first-quarter revenue rose as the company got a boost from more credit-card transactions from online shopping. Meanwhile, Visa delivered another quarter w ith strong growth in card spending across its global network. "For this to get to a level that would threaten Visa and Mastercard, this Facebook cryptocurrency would have to take over the whole world," said Brett Horn, senior equity analyst at Morningstar. "There's likely more limited ambitions for it." If that's the case then it's helpful to have connections with Mastercard and Visa because if people are using this coin, then they may want to cash them out into existing payment systems."

Another reason why credit-card stocks aren't moving too much on the news is likely due to uncertainty surrounding the future of Libra, said Lisa Ellis, partner and senior research analyst at MoffettNathanson Research.

"The long-term impact of Facebook's payment system could be mixed for Visa, Mastercard and PayPal," Ms. Ellis said.

Write to Jessica Menton at [e-mail]

(END) Dow Jones Newswires

June 18, 2019 18:12 ET (22:12 GMT)

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