At first glance, credit services companies appear to be front-line casualties as governments impose travel bans and implant social distancing measures to limit the impact of the deadly coronavirus. Understandably, severely reduced consumer spending on everything from upcoming summer vacations to restaurants has prompted many industry stalwarts to slash quarterly and yearly earnings projections.
However, judging from the panic buying of staple products across the country in recent weeks, the group should see a substantial increase in transactional demand from grocery and supermarket merchants as shoppers continue to stock their pantries in preparation for the virus. Even before the arrival of COVID-19, Americans spent 41% more on groceries compared to dining out, according to location intelligence firm Esri, per cnbc.com. Furthermore, credit services companies may benefit from a steady rise in subscription services, such as Microsoft's Office 365 and Netflix's streaming offering as more employees work remotely.
Below, we take look at three large-cap credit services stocks and identify possible trading opportunities from key chart levels.
Visa Inc. (V)
Visa Inc. (V) provides credit payment solutions for consumers, financial institutions, and businesses, with the financial services giant processing nearly $9 trillion last year in purchase transactions. The company sits well positioned to strengthen its partnerships with grocery stores after decreasing supermarket merchant swipe fees for a $50 premium card purchase from $1.15 to 77 cents. Earlier this month, the firm said that it expects second quarter revenue to be 2.5% lower than it previously forecast due to a slump in spending from the virus. Although Visa stock has tumbled 18.81% year to date, it has outperformed the credit services industry average over the same period by nearly 8% as of March 20, 2020. Investors also receive a 0.81% dividend yield.
Visa shares fell below multi-year support at $150 Wednesday before promptly recovering yesterday to close above this closely watched level. Swing traders who buy here should book profits on a move to $170, where price finds overhead resistance from an area of previous support. Protect capital by cutting losses if the stock fails to hold above its recent low at $139.80.
Mastercard Incorporated (MA)
Mastercard Incorporated (MA) offers transaction processing and other payment-related products and services in the United States and globally. The $228.31 billion payments titan, along with the Bill and Melinda Gates Foundation and British charity giant Wellcome, are joining forces to speed up the development of treatments for COVID-19, committing a combined $125 million to the effort. The firm warned that yearly revenue growth would come in "at the low end of the low-teens range" if the impact of the virus is limited to the first quarter, per businessinsider.com. As of March 20, 2020, Mastercard stock offers a 0.70% yield and has fallen 23.79% on the year.
Despite the Mastercard share price finishing in the red yesterday, it still closed above crucial support at $220 – an area on the chart that finds a floor from the September/October 2018 swing high. Those looking to enter should think about placing a take-profit order near $260, where the stock may find sellers near a horizontal trendline. Consider putting a stop under this month's low at $211.15 to guard against further downside.
PayPal Holdings, Inc. (PYPL)
PayPal Holdings, Inc. (PYPL) operates as a technology platform, providing digital payment solutions for consumers and merchants. It also offers gateway services that enable businesses to accept payments online with cards and digital wallets. In 2018, the technology payments firm entered into a partnership with Microsoft Corporation (MSFT) to enhance its push into the digital workplace, helping companies to become agile, collaborative, and mobile – an increasingly valuable alliance as more people work from home during the pandemic. PayPal stock has a market capitalization of $109.90 billion and is trading down just shy of 14% as of March 20, 2020.
The stock's sharp decline to a multi-year horizontal support line at $90 provides an opportunity for tactical traders. Those who take a long position should consider banking profits on a retest of the $110 area, where price encounters resistance from several reactionary swing points and the 200-day simple moving average (SMA). Implement risk management by placing a stop-loss order beneath the March 18 low at $86.15 and amending it to the breakeven point if the stock rises above the phycological $100 level.