In the beginning, there were two. Both were large, both were ambitious — this is the tale of Amazon (NASDAQ: AMZN) and Mastercard (NYSE: MA)… No, but seriously, if everything in the world were to crash and burn, I would take a bet on these two companies still standing amongst the wreckage.
With only a few wobbles between them over the past 6 months, what is the key to their success and will it help investors survive another crash in the future?
Amazon has a reputation for being an innovative and trend-setting company. That isn’t to say that all its ideas come to fruition — does anyone remember its Fire phone? Yet it has grown from a small online bookstore in the ‘90s to the behemoth that is now Amazon, surviving both the Dot-Com Bubble and the Great Recession, not to mention that it is swiftly catching up in market cap with the most valuable companies in the world, Apple (NASDAQ: AAPL) and Microsoft (NASDAQ: MSFT). Perhaps its many ‘failures’ are essential to its charm and its success — well, that and its endless reservoirs of cash.
Amazon has benefitted from its position as a digital service, from global infrastructure, and its adaptability in technology. Its products such as Alexa, Prime, and Amazon Web Service are guaranteed to bring in revenue, particularly as the latter two are subscription services. Due to this, Amazon has thrived during the lockdown period.
Amazon did so well that its Q2 earnings soared beyond analysts’ expectations with revenue up 40% to $89 billion and earnings per share at $10.30, almost double that of the same quarter a year before.
Amazon has shown that it can survive a general market crash and do so as if this was what it was born to do. Despite recent antitrust proceedings against Big Tech, the e-commerce leader holds a trifecta of factors which will see it through global pandemics and market crashes alike.
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- It has a diversified revenue stream, which will provide a sturdier foundation for handling an economic downturn.
- It has strong customer loyalty with retention rates of 93% for 1-year prime membership which then increases to 98% for 2 years or longer.
- It has the potential to grow in multiple areas such as Amazon Web Service — which is already a cash machine — healthcare, and advertising.
Amazon is a brilliant stock for both defensive betting and for growth.
Mastercard and its competitor Visa (NYSE: V) are companies that provide the technology to banks and other companies that deal with financials which enables them to make fast and secure payments. Neither of these companies are banks and thus don’t provide their own credit or debit cards, something which another competitor American Express (NYSE: AXP) does.
Mastercard stock is currently one of the top 10 stocks for hedge funds and you can see why when the past five years has seen its revenue nearly double to about $17 billion. With many predictions that by 2024 more than 50% of the world’s population will be making digital wallet payments, MasterCard is positioned to keep on benefitting from the steady rise of digital payments that only hovered around 23% of consumer transactions back in 2010.
During the pandemic, particularly in Q2, Mastercard saw its revenue slump. Its most recent earnings show a decline of 30% in quarterly revenue, although this has not worried investors as the stock has climbed 6% — as of August 13 — since the reports were released. Additionally, the payment-processor company has paid out its regular quarterly dividend of $0.40 per share, and it finished the quarter in a healthy position with $1.2 million in free cash flow
Mastercard, like other cashless firms such as Square (NYSE: SQ) and StoneCo (NYSE: STNE) will profit from the rise in digital payments. This lockdown saw a surge in people switching to online grocery and clothes shopping. With a higher percentage of the population using digital payments more and more, Mastercard is a safe growth stock to bet on that can survive another economic downturn.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold positions in companies mentioned above. Read our full disclosure policy here.
Financial Writer at MyWallSt
Poppy’s favorite stock is Nvidia as she loves innovation and this stock has bags of it. Nvidia invented the GPU in 1999 and even today its immersive graphics give life to the gaming world. Poppy is also inspired by Nvidia’s ability to imagine and create positive change for the world, with its AI technology fuelling new developments in the automotive industry, the medical industry, as well as powering data centers around the world.