How Will MasterCard Perform In The Next 3 Years?

February 22nd, 2018 by Trefis Team
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Upside
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Market
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Trefis
MA: Mastercard logo
MA
Mastercard

MasterCard (NYSE: MA) has performed strongly over the past few years. Its revenue has grown at a CAGR of 13% and its stock price tripled since 2013. MasterCard continues to be focused on expanding its network of co-branding partners and improving technology to compete in the rapidly growing online payments segment. Recent deals with PayPal, Bank of America, Santander and Banque Travelex, among others, should help the company continue growing at a strong rate going forward.  Credit card customers increasingly prioritize security and ease of use over reward points, and the company’s focus in this direction as it integrates the capabilities of NuData Security suggests an improved growth outlook. We expect MasterCard’s expenditures on sales and marketing, and client incentives to grow slower, and consequently drive operating margins.

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Our price estimate for MasterCard’s stock stands at $150, which is below the market price. We have also created an interactive dashboard which shows the forecast trends; you can modify the key value drivers to see how they impact the company’s revenues and bottom line.

Transaction revenue accounts for about a third of MasterCard’s overall revenues. The company has seen significant growth in its transaction volumes, supported by the transition towards digital payments and MasterCard’s expansion. The company’s focus on improving technology to enhance payments and securitize the process should further help it expand its customer base and co-branding partners, and consequently drive growth in volumes and revenues.

International transaction fees account for 23% of the overall revenue. With the recovery in global economic conditions, we expect improved consumer spending and international adoption of credit cards. Additionally, the company’s expansion in developing markets should drive international GDV and revenue by around 6% annually.

Assessments account for 28% of overall revenues. Growth in MasterCard’s U.S. Gross Dollar Volume, driven by the improvement in the U.S. economy and consumer sentiment, should help drive MasterCard’s assessment revenue by 7% annually.

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