Why MasterCard’s Stock Has Risen By Nearly 50% This Year

-1.91%
Downside
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Market
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MA: Mastercard logo
MA
Mastercard

MasterCard (NYSE: MA) has seen its stock gain nearly 50% this year. The company reported EPS growth of 22% on revenue growth of 17% for the first three quarters of the year as its core performance remains strong. The company posted strong growth across divisions, with transaction processing fees in the U.S. growing at 19% and gross dollar volume (GDV) of processed transactions growing by 6% in the U.S. The only downside for the company was that client incentives and rebates grew faster than overall revenue growth at 21%. MasterCard’s focus on expanding its network of co-branding partners and improving technology to compete in the rapidly growing online payments space also contribute to the improved growth outlook.

We currently have a price estimate of $134 for MasterCard, which is over 10% below the current market price.

According to a U.S. Payments survey conducted last year, 74% of customers would prefer to use a service that is more secure than one that offered more benefits. The addition of NuData’s technology should help make MasterCard’s services more secure, and will also improve the user experience, eliminating the hassle of having to remember difficult passwords and answers to security questions, multi-factor authentication steps, and giving customers added peace of mind about having their accounts hacked or identities breached.

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MasterCard remains in an extremely strong position overall. It is focused on increasing the revenue from transactions processed on its network in the U.S. as well as internationally. This can be achieved through a few routes:

  • Increasing the number of MasterCard issued cards in circulation: As an increasing number of international merchants accept credit and debit cards, and more international customers shift from cash to card transactions, we expect that volumes will grow substantially.
  • Increasing the number of devices through which payments can be made: Recent developments in mobile phone payment technology are expected to increase the reach of financial institutions across the world. The global volume of money spent using mobile phones is expected to grow to over $1 trillion by 2019. Almost 166 million users are expected to use NFC technology by 2018. In 2021, NFC or other contactless technologies are projected to generate close to $190 billion in transaction value.
  • Increasing the spend per customer through increasing ease of use, security, reward points, and size of co-branding network: Recent deals with American Airlines, Bed Bath & Beyond, and PayPal in the U.S., Walmart in Canada and China, Axis Bank in India, and Amadeus (an international travel company) will help MasterCard on this front. These partnerships should bring in more customers and also boost spending per customer.

Please refer to our complete analysis for MasterCard

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