Bakkt stock

Bakkt Stock: Can Bakkt change the game through partnership with MasterCard?

Bakkt Holdings Inc (NYSE:BKKT) is a cryptocurrency platform that allows consumers and institutions to buy, sell, store and spend digital assets. However, the company wants to change the cryptocurrency game by allowing traditional investors and institutions to get involved in Bitcoin that has US federal regulatory oversight. At current, the cryptocurrency market is highly decentralised and this factor exceeds the capacity of some investors and institutions risk appetite. Bakkt recently noted in an investor presentation that its potential market will exceed $5.1 trillion by 2025.

However, more recently the company announced a partnership with payment solution Goliath Mastercard. The companies will partner “to make it easier for merchants, banks and fintechs in the U.S. to embrace and offer a broad set of cryptocurrency solutions and services”. The main function of the partnership will allow Mastercard partners to use Bakkt services to obtain access to digital assets through custodial wallets powered by the Bakkt platform.

Furthermore, the partnership will also entail streamlined issuance of branded crypto debit and credit cards powered by Mastercard. With plenty to breakdown, this article will discuss what the Bakkt Mastercard partnership means for Bakkt stock.

The Bakkt Mastercard partnership breakdown

Following the companies debut on Wallstreet last week, the recently combined company had been trading below its PIPE offering price at $10. In saying this, we have seen this lack of sentiment across the SPAC market which has been relatively quiet over the past few months. However, the tides have dramatically turned after the companies Mastercard partnership announcement. Investors have flocked to the stock after the news, with BKKT stock gaining 80% midway through Monday’s trading session.

Mastercard have gradually expanded their portfolio of cryptocurrency ventures over the past few years. This includes its acquisition of CipherTrace and recent partnerships with leading crypto giants. However, the Bakkt partnership opens the doors for the company to vastly expand its customer network across multiple Mastercard partners. Mastercard aim to integrate cryptocurrency into its well known loyalty platforms. Mastercard see Bakkt as an important player in bringing its loyalty reward strategy alongside cryptocurrency integration to the market. For Bakkt, the timing of this partnership has altered the stocks trajectory in dramatic fashion.

Furthermore, the partnership will aim to target millennials that would be more likely to use a reward service or debit card that has Bitcoin functionality. The race is on for seamless integration of crypto in the payment solution industry with Paypal continuing to invest in that area. Therefore, investors are more likely to see the Mastercard partnership as a long term play.

Bakkt stock
Bakkt is a digital assets custody service, known for Bakkt Bitcoin Futures contracts trading. Conceptula photo. Stone, Staffordshire / UK – October 27, 2019

What can investors expect from Bakkt stock?

Currently, Bakkt stock is trading 60% higher in Monday’s trading session. This of course is fuelled by the Mastercard deal, however when will Bakkt see results from the partnership? At this stage, Bakkt is yet to release any revenue guidance changes as a result of the partnership. The company reports its Q3 on 12 November, which should shed light on the partnership blueprint with Mastercard. For now, the organic market forces have played their part sending the stock to an all time high.

From Bakkt’s last investor presentation, Bakkt forecasts revenue to grow at a CAGR of 75% with 2025 revenues expected to be $515 Million. The company also noted that they forecast to be cash-flow positive by 2023. Another positive investors may miss is that the company recently received roughly $500 million in cash to add to Bakkt’s balance sheet. A strong balance sheet is vital for any company, let alone in an industry such as cryptocurrency solutions.

“Mastercard is committed to offering a wide range of payment solutions that deliver more choice, value and impact every day. Together with Bakkt and grounded by our principled approach to innovation, we’ll not only empower our partners to offer a dynamic mix of digital assets options, but also deliver differentiated and relevant consumer experiences.”

said Sherri Haymond, executive vice president, Digital Partnerships at Mastercard.

The Bottom Line – Bakkt stock

Overall, the Mastercard partnership is a big deal for the company in achieving its strong revenue guidance over the next 4 years. As discussed, the Q3 report should assist some investors quantify the magnitude of the deal in revenue terms. With the stock now trading in the $16 region, it will be interesting to see where the stock finds its new equilibrium.

The information above is strictly for informational purposes only and is not financial advice nor does it constitute a recommendation. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.

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