By Jacob Sonenshine
The major credit cards have taken a beating.
President Donald Trump proposed a rate cap, for one thing, and concerns about stablecoin also have rattled the stocks.
But it's possible that stablecoin creates opportunities, not threats. If it plays out that way, credit card stocks could rebound substantially.
A bullish signal emerged Thursday. With the three major U.S. stock indexes in the red, major credit card stocks rose slightly. This suggests that, at least for the near-term, those who wish to sell have already done so -- and buyers are becoming more interested at these prices.
"Anytime you see a stock rallying in a weak tape, it's encouraging and deserves a second look," says Fairlead Strategies founder Katie Stockton, who remains concerned about these stocks after any potential near-term bounce.
Concern makes plenty of sense, given that the companies haven't risen above key levels of the past, but they certainly have a chance to recover. Visa, Mastercard and American Express have seen their stocks drop 19%, 18% and 23%, respectively, from record highs last year.
The latest headwind has been the Iran war, which has sent oil prices higher, kept interest rates elevated and pressured the outlook for consumer spending. But before that, the main issue has been that stablecoins, which offer merchants lower transaction costs and faster payment settlements, could take market share from the card companies.
The stock prices already reflect many of the pressures. Now, Mastercard and Visa trade at just over 24 times analysts expected earnings for the coming 12 months and just under 22 times, respectively. Those are slim premiums over the S&P 500's 20.5 times, whereas historically they average much larger premiums, according to FactSet. American Express is down to about 16 times.
These stocks have often traded at 30% or wider premium in the past decade, as the market has rarely second guessed the relatively high and sustainable earnings growth that emanates from the world's gradual move from cash into credit cards. So any development that convinces the market that these companies are still in for aggressive growth can boost the shares.
"They are buys," says Albion Financial Group Chief Investment Officer Jason Ware, who sees the earnings growth remaining strong.
And buying could prove smart, especially if Trump's favored 10% rate cap does not materialize.
In fact, analysts have lifted -- not lowered -- 2026 earnings estimates a touch, according to FactSet. They expect aggregate earnings per share for the group to rise in the low teens in percentage terms this year, driven by just over 10% sales growth to a combined $163 billion. Much of the rest of the bottom line growth would emanate from share repurchases, which reduces the number of shares and increases earnings per share.
That outlook certainly has a chance to materialize, as there are plenty of reasons to believe credit card companies will protect against the stablecoin threat. As long as the U.S. economy sidesteps recession, the card companies can see the sales and earnings growth come in.
Mastercard, for one, is developing its stablecoin capabilities. It spent $1.8 billion to acquire BVNK, which provides stablecoin infrastructure.
"We view the BVNK acquisition as a critical, long-term strategic move for Mastercard given it positions the company as the orchestration layer between fiat and stablecoin rails," writes Keefe, Bruyette & Woods analyst Sanjay Sakhrani.
Visa's tap-to-pay function uses stablecoins. It seems to be working, as the company said on its first quarter earnings call that tap-to-pay has just hit 80% of all face-to-face transactions. American Express has been less clear about its stablecoin strategy.
At some point, the market will appreciate how current these companies' offerings are -- and send the stocks higher. Mastercard and Visa appear better bets for the moment.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 19, 2026 17:00 ET (21:00 GMT)
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