Out Fox The $treet

Square falls after moving further into risky loans. The departure of the CFO is another big risk for the stock. The long-term margin picture is mostly misunderstood by investors leading to the insane valuation when the stock reached $100. Square is still too expensive at $70 with these negative signals. In a predictable move, an overpriced stock like   Square   ( SQ ) quickly surged to $100 and just as quickly gave up the gains of the last few weeks. The mobile-payments company has quickly expanded into new areas and the market rapidly accepted them as easy money. Some likely doubts are emerging over a further expansion into the loan business, questioning if Square is running out of opportunities for customer expansion in more strategic areas. Read the full article on Seeking Alpha.  Disclosure: No position mentioned. Please review the disclaimer page for more details.   

After the close, Visa (V) reported the following numbers according to Briefing.com :

MasterCard reported mixed Q1 results on surging costs. The stock continues struggling to trade above $100 as surging incentives stall earnings growth. The risk remains to the downside though the history is that investors are willing to overpay for the sector. Before the open, MasterCard (NYSE: MA ) reported that  Q1 earnings  declined from last year but beat analyst estimates. The reason to like the company remains intact, but the reason to own the stock is still questionable. Read the full article on Seeking Alpha.   Disclosure: No positions mentioned. Please read the disclaimer page for more details.

Visa reported FQ2 earnings that repeated a trend of slower-than-expected growth. The payments processor faces negative trends of brands, requiring higher incentives in contract negotiations along with delayed international expansion. The stock remains too expensive with stock gains on the backs of multiple expansion and not earnings growth. Quarter after quarter, Visa (NYSE: V ) churns out single-digit growth metrics. The market though values the payments processor at high-growth multiples, questioning the reasons for chasing the stock. Read the full article on Seeking Alpha.  Disclosure: No positions mentioned. Please read the disclaimer page for more details.

Google recently announced Android Pay as a launch partner with a new tokenization security service from Visa. The Visa plan includes blocking transaction fees on mobile payments for technology companies like Google. Google is positioned to benefit long term via other arrangements including marketing fees from credit card issuers and loyalty programs with consumers. Making money off any service is always a nice outcome, but sometimes the intent of services is to maintain customer loyalty or attract new customers. In the case of mobile payments, the vision heading into the end of May was that new payment providers would collect small fees that might eventually add up to billions. The news of the day suggests that the apple cart might have been turned over by the payment processors of Visa (NYSE: V ) and MasterCard (NYSE: MA ). Read the full article on Seeking Alpha. Disclosure: Long AAPL. Please review the disclaimer page for more details....

Summary IBM is reportedly working on a digital cash technology to work with global currencies. Such a digital payments network could have major repercussions for the high margins of Visa and MasterCard. The technology concept has an interesting twist considering the partnership IBM is forging with Apple and the ability to connect this network with Apple Pay. Last week,  Reuters broke news  that IBM (NYSE: IBM ) was working on adopting bitcoin technology to potentially develop a form of digital cash for a payments system. The details are sketchy at this point, but the news should give pause to a few high-priced stocks in the payments processing sector. Read the full article on Seeking Alpha.  Disclosure: Long IBM. Please review the disclaimer page for more details. 

Summary MasterCard has lost momentum after several years of substantial gains. High operating margins are attracting competitive threats. Virtual currencies offer lower costs. Back in January, Stone Fox Capital warned that the MasterCard Incorporated ( MA ) stock split could signal a top in the stock. The company followed up the split with an earnings miss that further hit the stock. Suddenly, a stock that had ridden an uptrend for several years faces the reality that a bullish trend doesn't mean a never ending stock gain. MasterCard is the second largest payment processing network behind Visa ( V ) . The company connects consumers, financial institutions, merchants, and businesses in more than 210 countries around the globe. Even after the recent stock weakness, MasterCard is still worth around $90 billion. Read the full article at Seeking Alpha. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

The upcoming stock split could interrupt the relentless gains by MasterCard ( MA ) . While performing a split technically has no financial impact on investors, the mechanics of the split greatly impacts the psyche of investors. As most everybody knows, MasterCard operates a payments processing network, connecting consumers, financial institutions, merchants, and businesses in more than 210 countries around the globe. The company competes against Visa ( V ) in a near duopoly for the processing of credit card payments. Read the full article at Seeking Alpha. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

Before the market opened on Monday, American Express Company (AXP) announced the official rollout of the Bluebird card with Wal-Mart Stores, Inc. (WMT) . The Green Dot Corporation (GDOT) stock collapsed nearly 20% over the next two trading days to move back to all time lows. The company obtains 62% of revenues from a deal with Wal-Mart, so the market sees this as a potential major blow. The company provides widely distributed, low cost banking and payment solutions to a broad base of U.S. consumers. Green Dot's products and services include its market leading category of General Purpose Reloadable (GPR) prepaid cards and its industry-leading cash transfer network which are available directly to consumers online and through a network of approximately 60,000 retail stores nationwide where 95% of Americans shop. While this deal could be a threat to the revenue stream, one has to question whether American Express is the answer for the unbanked. What is the catch? How could a company ...

Just about every day, a company releases news regarding the mobile payments area. Unfortunately for investors with only access to the public markets, the news tends to be from a private company and more importantly, the focus is usually on Square. For investors, a few opportunities exist via PayPal, a division of eBay Inc. (EBAY) and Intuit (INTU) . See original article from April regarding the different investment options. PayPal appears to have the best plan, but do investors get enough exposure from an investment in eBay with a market cap of $64B? Read the full article at Seeking Alpha. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

After recently writing articles (I, II) about mobile advertising, it seemed appropriate and interesting to check out the mobile payments industry next. With smartphones and tablets now widespread, the mobile payments industry appears ripe for major growth in the next 5 years. Normally being ahead of the curve on mobile adoption, I actually found myself very uninformed on mobile payments. Maybe the central part of the country is just behind on this technology adoption as I've yet to run across a small business owner using a mobile card reader. For now, the industry is very fragmented with numerous developments underway. Not to mention that concepts of whether mobile payments means the customer or the business uses the mobile device are mixed. The potential in this sector has attracted big boys including Intuit (INTU) , the PayPal division of Ebay (EBAY) , and Google (GOOG) to develop various solutions. Also, traditional payment processors MasterCard (MA) and Visa (V) are working ...

With news the last week so that the USPS is planning to slow down 1st class mail, one has to wonder who could fill the void. After all, huge volumes of mail count on that next day delivery. Actually the facts were astonishing to me. 42% of mail reaches its destination within 1 day and just about all 1st class mail makes it within 3 days. That is a major portion of the mail that would now drop from 1 to 2 or 3 days. What about if the postal service stops Saturday delivery? Mail something on Thursday for a few blocks away and it might take until Monday or Tuesday to arrive. Actually it might not be a huge deal as most people using the mail don't expect next day delivery. Still it's a reduction in service that undoubtedly some people rely on. Less services will reduce the benefit of the $3B cuts in costs. Why not focus on cutting the costs of keeping existing services? Less benefits for employees, reducing redundant processing facilities, and closing offices in small cities. J...