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Is Now the Time to Invest in Credit Card Giants as Financials Decline?

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The recent market volatility has hit the broader financial sector, causing bank stocks to plummet and the Financial Select Sector ETF (XLF) to drop by over 1%.

Amidst this downturn in financials, investors may be looking at American Express (AXP), Visa (V), and Mastercard (MA) to see if there are better opportunities to buy stocks in these credit card and transaction services giants.

Recent Performance

Despite the recent pullback, both Mastercard and Visa stocks are still up by 30% and 23% respectively, outperforming the S&P 500โ€™s 13% gain. American Express shares, however, have had a flat year-to-date performance.

Looking at the three-year performance, American Express has had a total return of 45%, outpacing Mastercardโ€™s 16% and Visaโ€™s 15%, as well as the benchmark index.

Dividend Comparison

American Express offers an annual dividend yield of 1.61%, surpassing Visaโ€™s 0.78% and Mastercardโ€™s 0.58%. American Expressโ€™s dividend also exceeds the S&P 500โ€™s 1.49% average, while its peers fall short in this aspect.

Outlook & Valuation Comparison

The outlook for all three credit card giants remains positive, with expectations of double-digit percentage growth on their top and bottom lines in fiscal 2023 and FY24.

American Express stands out in terms of price-to-earnings valuation, trading at a 13.4X forward earnings multiple, 32% below the S&P 500. Visaโ€™s stock trades at a forward earnings multiple of 26.7X, while Mastercardโ€™s stands at 32.6X.

Visaโ€™s FY23 and FY24 earnings estimates have remained higher over the last quarter, providing further support to its reasonable P/E valuation. Although Mastercardโ€™s FY23 EPS estimates are slightly down, FY24 estimates are modestly higher.

Bottom Line

American Express stock presents compelling aspects but currently holds a Zack Rank #3 (Hold), along with Mastercard shares. Visaโ€™s stock, on the other hand, has a Zack Rank #2 (Buy) in correlation with the trend of positive earnings estimate revisions.

Investors may consider diversifying their portfolios by investing in credit card giants like American Express, Visa, and Mastercard, given their positive outlook and attractive valuation.

Frequently Asked Questions

  • Q: What has been the recent performance of American Express, Visa, and Mastercard?
  • A: Despite the recent market volatility, both Mastercard and Visa stocks have performed well, with gains of 30% and 23% respectively. American Express shares have had a flat year-to-date performance.
  • Q: How do the dividend yields of these companies compare?
  • A: American Express offers a higher dividend yield of 1.61% compared to Visaโ€™s 0.78% and Mastercardโ€™s 0.58%.
  • Q: What are the valuations of American Express, Visa, and Mastercard?
  • A: American Express has a lower price-to-earnings valuation, trading at a 13.4X forward earnings multiple, while Visa trades at 26.7X and Mastercard at 32.6X.
  • Q: Which company has the most positive outlook?
  • A: Visa has more positive earnings estimate revisions compared to American Express and Mastercard.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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